Yesterday I said that expectation could fill risk in the market. This is because our decisions are made based on our expectations. Once there is a market expectation that implies there may be a bubble burst in the near future, the market will take the information seriously and sell out their holding assets or goods and create the situation of bubble burst. However, the market expectation about bubble burst may not actually be caused by the signs of bubble burst or other sorts of direct or indirect evidence, sometimes they could merely be caused by mistransformation of information or miscommunication.
In addition, the market expectation may not reflect the true market state, as I mentioned yesterday that those who have market powers in the market may be the minority. Their opinions form the market expectations. However, they may not speak out their real expectations and opinions due to personal interests. In addition, they are not necessary right about their views of the future. When they are wrong, the signals sent by them do not reflect the real situations. When the market expectation has been far from the real situation, once some people realise there is a mistake, then there will be a very volatile redistribution of people’s wealth and resources, this could be a temporary shock or a crisis.
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