Act. v. What a financial market supposedly does. As if it were a living creature with a sense of self and volition . . . Depicting a financial market as an athlete sprinting, leaping or cliff diving makes news coverage more exciting than a droning flux of numbers.
The above definition is from “The Devil’s Financial Dictionary,” Jason Zweig’s market-focused version of Ambrose Bierce’s brilliant early 20th-century satire on the meaning of common words.
Zweig cites research by Michael Morris, a professor at Columbia Business School, who wrote (with three other professors) a paper titled “Metaphors and the market: Consequences and preconditions of agent and object metaphors in stock market commentary.” The conclusion: How commentators speak about markets can influence investors’ opinions.
The researchers divided market punditry into two distinct metaphorical approaches, which they call “agents” and “objects.” Those who employed agent metaphors “describe price movements as action, as the volitional, internally-driven behavior of an animate entity. This type encompasses anthropomorphic description as well as description of the market as like an animal.”
Examples include “the Nasdaq climbed higher,’’ or ‘‘the Dow fought its way upward,’’ or ‘‘the S&P dove like a hawk.’’
The object approach uses metaphors to describe price movements “as events in which inanimate objects are buffeted by external physical forces.” For example, ‘‘the Nasdaq dropped off a cliff,’’ or ‘‘the Dow fell through a resistance level,’’ or ‘‘the S&P bounced back.’’
We know from Princeton professor Burton Malkiel that markets take a random walk, without a predictable pattern or memory from day to day. Hence, describing markets as having volition or the ability to act on their own might be colorful and make dry reports more readable, but it isn’t in any way accurate.