We must all come to terms, he insisted, with the idea that common stocks have both an investment characteristic and a speculative characteristic. That is, we know the direction of stock prices is ultimately determined by the underlying economics but we must also recognize that “most of the time common stocks are subject to irrational and excessive price fluctuations in both directions, as the consequence of the ingrained tendency of most people to speculate or gamble—i.e., to give way to hope, fear, and greed.”
