Value investing and human Behavior Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Value investing and human Behavior Case Study Solution

Abstract

The case illustrates the interviews from Eric from the two value investors Kim and Charles, to understand the value investing phenomenon and the behavior of human while performing in the money market. Over the period of time and especially after the financial crisis, the phenomenon of value investing and value management raised in the market, due to the subtle nature of the financial markets and behavior of the volatile stocks.

Since during the financial crisis, the value investors along with the other market players focused on the bandwagon effect of technology and loan system, the market crashed resulted in loss of billions. In such situations, many investors and markets failed to cope up with the change while some investors found the opportunity in such situation, as stock price dropped, giving investors the opportunity to purchase stocks at lower prices and sell in the market when the situation revives.

From all these discussion and analysis, it has been drawn, that the role of the value investor is crucial in analyzing the market trend and future market position, since many times these investors failed to predict the market and become a part of band wagon effects; they failed to create value for the company and the clients.

The key to effective value investment measures is to develop the snob effect and act against the market trends, such has been discussed by Kim and Charles as the contradictory role of the value investors.

Introduction

The article “value investing, Human Behavior and why you should ignore the markets”, illustrates the perspectives of the value managers in the US market. The interview entails the illustration of the perspectives of the value managers that after the election of Trump shares the view and performance of market in detail.

Since the election of Trump has been an unexpected result, many value managers and analysts perceived it to be damaging for the country’s future as Trump poised great uncertain policies and perspectives for the country which may have effected or reduced the interest rates. According to Kim, the interest rates might have declined due to the uncertain markets however, upon analysis of the market, it has been seen that the markets re-boosted and interest rates increased,which certain benefited the markets.

According to Charles, another analyst, the theory of value manager is based on snob effect, thy have to act against the market. Though many times, this strategy disgruntles the clients however, in the long-term, this has been a successful strategy.For example, Charles, indicated the Microsoft Company as the emerging valuable company in market, however the crash of the Pc usage and introduction of cloud computing greatly affected the share price of the Microsoft.

Perhaps, the particular trend has been short-lived and Microsoft elected its share price from $30 TO $60 in the later years. In such perspective Charles and Kim indicate that the job role of value manager is to act against the market trends which are usually short lived.According to these two analysts, the new trend in the market is most of the time short lived and clients must not act in response to such trend, they should wait and let the market settle.

According to Charles, there are two types of bias that the value managers faces while dealing with the client, one is, everything is short lived and other is markets are to be responded for certain action.He elaborated, that human behavior is based on the fact that the investment should yield short time results, since there is no guarantee to future, and that if certain trend is moving fast in the market, they must also act in the particular direction.Such can be taken from the example of Technology bubble, in which majority of the clients invested and resulted in crash.

Lastly, Charles and Kim detailed the role of the value investor, which has evolved over the period of time.According to them, the selection of company for value consultancy has become so easy and convenient through the technological advancement, that they need to filter in the data from different resources and the software will crouch the data in a way that best suits the particular analysis for a situation.

Also, they emphasized, that in order to be the successful in the market, the value investors must learn to act against the market or even the individuals so to create distinctive stance in the new and existing market. Though there are many constraint to move alone into market for value investors, however, acting in a different way is the key to successful analysts for value creation. (Kirzner, 2017).

Situational Analysis

According the Eric, the interview conducted with Charles and Kim- the value fund managers depicts the trends of the market, according to Charles, the markets behaved opposite to as expected by the election of Trump as president, as many people expected Hilary to be the next elected president, the election of trump presented great uncertainty for the finance markets. It has been mainly due to the different polices, parliament structure and agendas presented by the Trump as compared to Hillary’s such uncertain market dropped the share prices markets which at larger effected many businesses.

Value investing and human Behavior Harvard Case Solution & Analysis

However, according to Charles, the markets gained the momentum in a very short period of time, after Trump got elected and out of expectation, the interest rates raised in the market.Such raise depicted the trump policies to bring the money back into US.The increase in the interestrates is beneficial for the country, since it allows the value investors to predict the markets more effectively and bring more prosperity for the client in the long term.The increased interest rates also depict the well-functioning of the stock market that again benefits the businesses and the clients’interest in the long term.................

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