By Rob Bennett
I argued last week that the 37 percent loss experienced for U.S. stocks in 2008 was largely a mirage. Contrary to the core premise of the Buy-and-Hold Model, stock price changes do not reflect rational reassessments of the value of stocks made by investors in response to unforeseen economic developments but primarily emotional responses by emotional human investors. Investors overreacted to the bad news of 2008 and then compensated for the overreaction over the course of the following eight years, causing gains that have exceeded by a good bit the average long-term gain for U.S. stocks.
It's a different way of thinking about what is happening when stock prices change over time, one that I find more in tune with both common sense (price discipline is critical in all markets other than the stock market and so it is hard for me to accept that investors don't…
