2. Traditional economists believe that the market is rational and its operation has its inherent logic. Because investors can fully understand the situation of listed companies, through a series of rational calculations, they can accurately determine the price of each stock. When investors enter the market, they can rationally choose the best stocks to invest according to this cognition. The stock price will keep rational correlation with the company's future earnings expectation, which is the efficient market hypothesis, which assumes a perfect and rational market, and all stock prices can reflect the currently available information. In addition, some traditional economists also believe that financial markets are always "correct". Market prices can always correctly reflect or reflect the future development trend, even if this trend is still unclear.
After investigating Wall Street, Soros found how unrealistic the previous economic theory was. He believes that the financial market is turbulent and chaotic, and the decisions of buyers and sellers in the market are not based on ideal assumptions, but on investors' expectations, and mathematical formulas cannot control the financial market. However, people's cognition of anything that can actually be obtained is not perfect. Investors' prejudice against a stock, whether positive or negative, will lead to the rise or fall of the stock price. Therefore, the market price is not always correct, and always reflects the future development trend of the market. It often ignores the possible influence of some factors in the future because of the overwhelming speculation of investors. In fact, it is not the current forecast that matches the future events, but the current forecast that creates the future events. Therefore, the reaction of investors after obtaining relevant information cannot determine the stock price. The decisive factor is not so much investors' expectations based on objective data as their own psychological feelings. The price paid by investors is not only a passive reflection of the value of the stock itself, but also a positive factor that determines the value of the stock. At the same time, Soros also believes that since the operation of the market is from facts to ideas, and then from ideas to facts, once the gap between investors' ideas and facts is too large to correct itself, the market will be in a state of violent fluctuation and instability, and then the market will be prone to a "boom-bust" sequence. The way for investors to make profits is to infer the unexpected situation that will happen soon, judge the occurrence of ups and downs, and move against the trend. But at the same time, Soros also pointed out that the bias of investors will lead to the market's follow-up behavior, and the unbalanced follow-up behavior will eventually lead to the collapse of the market due to excessive speculation.