Investment theory

Investment theory should recognise that the merits of an issue reflect themselves in the market price not by any automatic response or mathematical relationship but through the minds and decisions of buyers and sellers. Furthermore, the investors' mental attitude not only affects the market price but is strongly affected by it, so that success of a commitment-properly considered-must depend in some part on the subsequent maintenance of a satisfactory market price. Hence in selecting an investment, even one presumably purchased for income only, reasonable allowance must be made for such purely market-price elements as can be ascertained, in addition to the more primary consideration which is paid to factors of intrinsic value.