Editing Greed and fear (section)

{{Short description|Emotional states in investing}}
{{Use dmy dates|date=March 2016}}
'''Greed and fear''' refer to two opposing [[emotional state]]s theorized as factors causing the unpredictability and [[volatility (finance)|volatility]] of the [[stock market]], and irrational market behavior inconsistent with the [[efficient-market hypothesis]].  Greed and fear relate to an old [[Wall Street]] saying: "financial markets are driven by two powerful emotions – greed and fear."

Greed and fear are among the [[animal spirits (Keynes)|animal spirits]] that [[Keynes]] identified as profoundly affecting economies and markets. [[Warren Buffett]] found an investing rule in acting contrary to such prevailing moods, advising that the timing of buying or selling stocks should be "fearful when others are greedy and greedy only when others are fearful."<ref>{{cite web|url=http://www.berkshirehathaway.com/letters/2004ltr.pdf |website=Berhshire Hathaway|author=Warren Buffett|title=Chairman's 2004 Letter to Investors|page=4|accessdate=September 29, 2018}}</ref>  He uses the overall [[Market capitalization]]-to-[[Gross domestic product|GDP]] ratio to indicate relative value of the stock market in general, hence this ratio has become known as the "[[Buffett indicator]]".<ref name=Mislinski2020>{{cite web |last1=Mislinski |first1=Jill |title=Market Cap to GDP: An Updated Look at the Buffett Valuation Indicator |url=https://www.advisorperspectives.com/dshort/updates/2020/03/03/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator |website=www.advisorperspectives.com |archiveurl= https://web.archive.org/web/20200314213432/https://www.advisorperspectives.com/dshort/updates/2020/03/03/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator |archivedate=14 March 2020 |date=3 March 2020 |quote=it is probably the best single measure of where valuations stand at any given moment |url-status=live}}</ref>