Practically Possible Blog

 Theory of Reflexivity Generally in finance the " Reflexivity theory states that investors don't base their decisions on reality, but rather on their perceptions of reality instead " - George Soros. In other words, stock prices might increase or decrease the equilibrium values by a significant amount persistently over time. This is because the process of price formation is reflexive and dominated by positive or negative feedback loops between prices and expectations.  Reflexivity in our life We used to adhere to the principle of reflexivity without consciousness in actual life as well. Consider the following scenario: You are the batter and you observe a field for bouncers. As a result, you prepared for a bouncer on your positive loop or a yorker or some other deliveries on your negative loop. But what drives a person to choose a positive or negative loop?  Don't think it's just about the probability. Because it's not about probability, flipping a coin relies