When you invest, your capital is at risk.



While textbooks may teach the perfectly efficient nature of financial markets, George Soros, Infamous for “breaking the Bank of England”, studied the influence of human judgement on assets.

George Soros. Infamous for “breaking the Bank of England”, the billionaire hedge fund manager owes his success to the “theory of reflexivity”. While textbooks may teach the perfectly efficient nature of financial markets, Soros studied the influence of human judgment on assets. Investors don’t base their choices on reality but on their perception of reality.

At the theory’s core, perception of an asset influences its fundamentals which influences the price and so commences a positive feedback loop. Let’s look at Dogecoin. Elon Musk endorsing Doge, despite its lack of developed technology, increased how it was perceived. As it became more popular and the price rose, dev resources were deployed to improve its underlying technology which led to further price gains. The theory of reflexivity works in the opposite way too.

Sure, this may appear obvious having lived through a period of hype cycles and crashes, especially recently but the way Soros applied his theory made him his billions.  By predicting how perception will change, Soros could get in before rallies and out before crashes.

If you have a spare few hours, read all 11000 words Soros put together on the topic here.

Want more?

You know what to do

Insights, trends and company deep dives delivered straight to your inbox.

Stake logo
Over 7,000 5-star reviews
App Store logoGoogle Play logo

Subscribe to our free newsletters

By subscribing, you agree to our Privacy Policy.

Stake is the trading name of Hellostake Limited, a company registered in England and Wales (Company no. 11676409). Hellostake Limited is authorised and regulated by the UK Financial Conduct Authority under the Firm Reference Number 830771. Registered address: 85 Great Portland Street, London, W1W 7LT, United Kingdom.

When you invest, your capital is at risk.

The value of your investments can go down as well as up and you may receive back less than your original investment. Any advice is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate independent taxation and legal advice. The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services.

At Stake, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Please view ourTerms & Conditions,Privacy PolicyandDisclaimers before deciding to use or invest on Stake. By using the Stake website or service in any way, you agree to our Privacy Policy and Terms & Conditions. All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance

Copyright © 2024 Stake. All rights reserved.