I would like to discuss the article, which is called U.S. stock market defies pessimists. It focuses the evolvement of economic situation in our country. The overarching argument that the author makes is that the finance system is slowly but surely recovering from the recession. In addition to that, the journalism claims that pessimistic predictions are not quite grounded and in the near future, the economy of the United States will become stable. It is necessary to compare this opinion with that one of distinguished scholars and show how they approach this question. For example we may refer to the book Corporate Finance Fundamentals, written by Stephen Ross and Randolph Westerfield, namely to the chapter Capital Market History that investigates the historical risks of various types of investments.
They state that on the whole, a recession or crisis is an inseparable part of economic development, naturally if we are speaking about capitalism. Additionally, they indicate that during these periods the risks of investments are significantly higher and certainly a person should be very careful in his or her choices. Yet, the scholars are firmly convinced that in the overwhelming majority of cases, the fluctuations of the stock market are not accidental and there is certain pattern, in particular,r we should mention the cyclic nature of stock market economy that combines ups and downs. At a certain point, the rates reach some bottom line but in the long run they are bound to rise. With the reference to this issue we may say that the journalist presents the views leading experts, who are also firmly convinced that the stock market the United States will stabilize.
Nonetheless, it is not the most important aspect that both the article and the book have in common. In this regard, we need to discuss the idea, expressed in both these works, for example that the investors run practically the same risks even during the time of economic growth and prosperity (Ross et al, p. 234). Ross and Westerfield believe that there are common misconceptions about the so-called safe markets, and these stereotypes may have rather detrimental effects. The thing is that that even at time when the finance system of the country seems to be stable, there can be unexpected fluctuations. Furthermore, they say that efficient markets have some disadvantages, because they do not enable an investor to earn excess or abnormal returns. Perhaps, the word disadvantage is not the most appropriate in this case, because efficient markets offer opportunity for gradual growth. Finally, they warn us against the belief that efficient market economy insures anyone from wrong choices. It is hardly possible for any person to be absolutely safe if he or she deals with capital markets. This seems to be the major point which relates this article to work of Ross and Westerfield. Judging from this texts one may deduce that the best way to protect ones own assets is to possess the most up-to-date information, which is the key to almost everything.
Thus, we may conclude that the article we have analyzed and the book by Stephen Ross and Randolph Westerfield explore such issues as the stability or the capital markets and the risks that investors so often have to take. We may infer that it is extremely difficult to draw a distinct line between an efficient and inefficient market, and very often the investors face practically the same obstacles.
Bibliography
Stephen A. Ross, Randolph W. Westerfield, Ross, Bradford D. Jordan. Corporate Finance Fundamentals. McGraw-Hill Education, 2005.