Self-Fulfilling Prophecy

Self-Fulfilling Prophecy or how fools are sucked in the stock market. Propounded by the American Sociologist, Robert K Merton, the concept holds: a supposed premise induces a certain behaviour in people, which seemingly validates the premise without asking how valid the premise is. The premise which caused the Indian stock market crash in May 1992 was that the BSE Sensitive Index would cross the 5000-points mark, resulting in boom conditions. The mob rushed in, bought whatever they could lay their hands on, ignoring the fundamentals, sometimes at P/Es of 500, and when the market crashed, sold when everyone was selling, TAKING A BATH

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