The market sometimes resembles a march with no real destination.
You beat a few marketing drums and get people to march along with you. As long as you keep the beat, the people will follow you, until either you lead them over a cliff, or a new drummer comes along.
There is new research to suggest that group activities–like dancing and group marching–do increase group loyalty.
As detailed in New Scientist, research Scott Wiltermuth, of Stanford University, made a group of people engage in synchronized activities: marching, chanting, singing, etc. And a group participated in non-synchronized activities. Later, when they were asked to decide whether to participate with the group or strive for their own gain, the non-synchronized group acted less loyally.
It isn’t a stretch to see this same behavior in real life: the inauguration was full of marching bands and communal sing-alongs. Businesses have company meetings and chants.
I wonder: could we hear these communal chants online. Like on Twitter?
The article also mentions that images and propaganda can have a similar effect.
Charles Seger at Indiana University at Bloomington. His team primed students with pictures of their university – college sweatshirts or the buildings themselves – then asked how highly they scored on different emotions, such as pride or happiness. The primed students gave a strikingly similar emotional profile, in contrast with non-primed students.
This research leads me to wonder what cues produce what effects in the markets: whether its buying iPods or buying into a stock or other asset. Could we either watch these cues as they are produced, or could we recognize when primed people are heading an asset higher or lower?
The beat of marching consumers may be just as prevalent, albeit more subtle, when it comes to understanding the rhythm of market movements.