Hal Varian: belief

Transcript context

…Here’s a piece of yours that’s not commonly associated with you: “Are There Psychological Barriers in the Dow Jones Index?” Once it hits a certain level, then it’s broken through, and you can predict future returns. True or false? It’s very interesting you raise that question. What happened was, back in the . . . Oh gosh, when would this be? In the ’70s sometime, the Dow Jones approached 1,000 and then backed off. And they did it 23 times, I believe. I don’t remember the exact number, but it was multiple times. People were talking about the barrier or the $1,000 barrier, et cetera. And I said, “Hmm, I wonder what shows up historically.” And it turns out at this time, Dow Jones had just published a book of all of its prices going way back to when it was founded. We did a little analysis of that to see if there were barriers — so, if century marks was at a barrier, in the sense — did the stock price behave in some unusual way? This was not a theory or a hypothesis. We were just looking at the data to see what it said. What we found out was that the price increases accelerated as they approached the century marks in most periods. And that’s true even after people know that?…

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