By Rob Bennett
The S&P 500 experienced a loss of 37 percent in 2008. Was that loss real? Or was it a mirage? I believe it was mostly a mirage.
The conventional thinking is that the loss was real. Stock price changes are caused by unforeseen economic developments, according to the Buy-and-Hold Model. Investors change their assessment of the value of stocks each time they are exposed to new information. The banking crisis frightened investors. Their processing of all of the many negative information bits sent their way during those 12 months of time caused their belief about the future earning power of U.S. stocks to sour enough to justify slicing away one-third of the previous value of U.S. stocks.
Is this a realistic way to think about these matters?
The economic crisis was bad news. I recall reading an article in the Wall Street Journal in which serious people…
