My Theory on Why Randomness Shows Up in Stock Pricing

I was thinking about this today. Why is it that I can at one point have a very defined notion of a price in my head for a value of something and at other times it could seem to not matter to me?

I actually had a perfect example of this recently. I sold 12 somethings on ebay that I bought for $20 several years ago. It had its use at the time. Something happened. I forgot about it and now, it is worth $120 to someone else. Someone bartering with me to get 3 of them down to $90 gave me this random feeling. I didn’t care. I could flip a coin to decide the outcome. I went with generosity.

With stock prices, I think there are similar times where buyers and sellers are in that gray area where they wonder if a one cent difference really matters in price. Sometimes it depends on the stock. I know this isn’t technical and I have no direct solution. However, its just a different perspective on pricing. Its a theory that we will be able to get the price close, but not exact. Thanks for your time.

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Read up more on Herb Simon and bounded rationality…

What you describe is the random walk hypothesis. For big cap companies there is empirical evidence that you can pic randomly stocks and you will in the average the same return as the market