Werner and I thought that the same process might be at work in the stock market, too. Companies that are doing well for several years in a row gather an aura implying that they are a “good company,” and will continue to grow rapidly. On the other hand, companies that have been losers for several years become tagged as “bad companies” that can’t do anything right. Think of it as a form of stereotyping at the corporate level. If this corporate stereotyping is combined with the tendency to make forecasts that are too extreme, as in the sense of humor study, you have a situation that is ripe for
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