a quiz for noninvestors guess the price, page-3

Yin, you are right.

The longer a share stays at a given price, the more the market becomes influenced BY that price in their own thinking. It is a form of peer-group pressure.

It becomes difficult for the new investor to determine the VALUE of the company independently of the PRICE.

Potential new investors think that the market MUST have found the fair value for the share, because otherwise, why would it have stayed at that price for so long...?

It is a chicken-and-egg situation. The inertia of a share become self-fulfilling.

Why is it so cheap, they think. There must be a catch that I just can't see...

So we check our analysis. And we recheck. And we look at it from every perspective we can to find the catch. And then, when we are exhausted, and we still haven't found the catch, some of us walk away, because it is just too good to be true.

And some of us buy.

disclosure: 1,300,000 shares. Looking for more money under the couch. :)