Is the stock market a glorified casino?

Toegevoegde Waarde

Financial markets involve hundreds of trillions of euros. Besides companies and investment funds, many individuals also participate in stock market trading. This raises the question whether it is possible to beat the market as an individual, or whether the stock market can be seen as a glorified casino. Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics, was asked for her expertise in an episode of the podcast Toegevoegde Waarde.

Since many big players like central banks and investment funds also trade in the market, one occasionally gets the impression that individual investors are always at a disadvantage. As to whether this is actually the case, Pieterse-Bloem explains succinctly: ‘not really. In a well-regulated market, there is no insider trading, so in principle everyone trades with the same information'. However, institutional investors do tend to have more knowledge, as these are large companies with numerous analysts specialising in a particular market. 

Still, the stock market is not entirely comparable to a casino. Indeed, with gambling, it is the case that you cannot predict it at all, nor explain it afterwards. With financial markets, the outcome is also uncertain, but can often be explained afterwards. Hence, investing for individuals is not entirely comparable to gambling, the professor says.

More information

You can listen to the full episode from Het Financieele Dagblad, 24 February 2024, here

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