What do Jekyll and Hyde mean?
Using a literary allusion, the term “Jekyll and Hyde” refers to a stock market with two personalities, one good and one bad. In the market, Jekyll stands for good. It is safe, reliable, and suitable for making money. Hyde is the wrong person because she is unstable, uncertain, and usually risky for investors.
Jekyll and Hyde often show up on Wall Street as people’s feelings affect the stock market.
- A stock market that is both Jekyll and Hyde has two different personalities.
- Mr. Hyde could appear at any time and mess up an otherwise calm and logical market.
- Someone studying economics might say this is an example of behavioral finance.
How to Understand Hyde and Jekyll
In The Strange Case of Dr. Jekyll and Mr. Hyde by Robert Louis Stevenson, Dr. Jekyll, a good and friendly doctor, lets out his evil side, Mr. Hyde, by doing dangerous experiments on himself in a lab. Jekyll and Hyde are the same person, even though they have different personalities.
In some ways, the stock market is like a person who is both good and bad simultaneously. An outburst of negativity can quickly and for no reason destroy a stable and reliable market. Like the characters in Stevenson’s book, people in the market and people who are just watching are confused by this strange behavior and can’t figure out what’s causing it.
Changes in Behavioral Finance
The efficient market hypothesis says that the price of a stock will always be the same as its fair market value because it is based on all the information available at that time. An economist would say that strange market behavior goes against this hypothesis.
Behavioral finance is a relatively new field of theory that tries to explain how reasonable decision-making, or the lack of it, can cause markets to go up and down wildly. Bubbles form and then pop all at once because of how people act when they are greedy or scared.
