Is the day-to-day trading of shares by tens of professionals and thousands of amateurs really a social problem, asks HS Vision columnist Mikko Mäkinen.
Last during the week, an economist sued on Twitter that day trading in shares is so useless that practitioners would end up on the unemployment register.
HS Vision supplier Alex af Heurlinin in his view, the provocation was half-hearted: “One might as well ask whether there is any economic benefit to any stock exchange trade between investors.”
Personally, I have made tens of thousands of trades on the stock exchange. I started my career as an investor with quite a bit of capital. The only way to support myself with the shares was to trade actively. Maybe that’s why I didn’t go when the calf fished. It is, of course, difficult to be objective when accused of being a useless journalist.
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In addition to their work or studies, those who trade often do so out of love for the sport.
After all, it gave birth to a little somekahak. It is not very typical to start welcoming people to the unemployment card for honest work. But since some tends to escalate, it was also started to shout how useless economists are: “Who would notice if an economist missed a day’s work?”
One one of the most universal laws of life is this: my job is damn heavy, important, and demanding — everyone else is easier.
The work of a neighbor is never very important. The most likely profession for him is a salesman. Who needs sellers now, we know what to buy!
Of course, the most sensible thing would be not to belittle anyone’s work. While the importance of the work of doctors and police is very easy to understand, society needs people from side to side – even lawyers.
I guess few people deny the benefits of the stock exchange to society. It is good that even small money can be used to own large companies and that shares can also be sold if necessary. The more we save money on profitable properties, the less wealth we have.
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Lessons in psychology, technology and economics are often left in the hands of an investment hobby.
At the heart of the controversy is probably how much trade there is enough for the market to function optimally in relation to the cost of running the machinery. I do not think this can be precisely defined. I would question whether the day trading of dozens of professionals and thousands of hobbyists is really a social problem.
Their work or, in addition to their studies, those who trade often do so out of love for the species. Some are certainly addicted to gambling as well, but there are even better dopamine hooks for it. It’s hard to see bad enthusiasts getting to know companies and markets motivated by trading. On average, enthusiasts lose, but on the other hand, almost all hobbies pay off. Lessons from psychology, technology and economic activity are often left in the investment hobby.
The research literature is quite broad about the benefits of active trading. I found various studies showing that heavy trading both increases and decreases price volatility! Liquidity has been found to clearly create value, but not all traders increase liquidity. Research does not save us from this problem.
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If we start questioning the social value of a stamp dealer or a shammer, we are moving towards the ideals of the command economy.
Self I believe that active trading has value in a functioning market. When the stock market is vibrant, trading is easy. People are willing to pay for a reduction in friction in life. It has value, but I can’t show how much. And on the other hand, why do listed companies pay for a targeted analysis and market guarantee if they don’t benefit from it?
I have often been in an uncomfortable situation where I would like to sell my shareholding, but I can’t find a buyer for a larger number for weeks. If trading were less and more one-sided, this would happen much more often.
When stock prices are formed efficiently, it contributes somewhat to the efficient channeling of capital. Because the cost of a diverse market on a societal scale is very small, I don’t really see a problem with trading.
A market economy does not work perfectly and often needs guidance. Although Adam Smithin the invisible hand has not completely lost its meaning. Often, the actions of economically selfish individuals lead to socially good outcomes.
If we start questioning the social value of a stamp dealer or a shammer, we are moving towards the ideals of the command economy. There the wise men knew what people should do better than the people themselves. Creativity and freedom have their own value. The patent officer can become the most important scientist of the century and the most respected entrepreneur of our time as the algorithmic maker of the hedge fund.
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