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Behavioral Finance

What is Mr. Market?

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Mr. Market is an analogy for the stock market proposed by famed investor Benjamin Graham in the 1949 book The Intelligent Investor.

Mr. Market

Graham suggests that investors view the market as an emotionally unstable partner, Mr. Market. Each business day, Mr. Market offers to buy your share of the business and sell you his share. When he is in a greedy mood he sets a high price. When he is in a fearful mood sets a low price.


Benjamin Graham is known as the father of value investing. He suggests carefully valuing stocks and only buying when prices are below their intrinsic value.
Graham recommends not allowing the mood swings of Mr. Market to sway your strategy. Nevertheless, if Mr. Market offers you irrationally low prices in a quality company, you might buy. If he offers you irrationally high prices for a position you hold as a long term investment, it may be advantageous to sell.
The Mr. Market analogy suggests that the stock market isn't always efficient but prone to being moody and irrational. As such, a rational investor may go through periods where there isn't much to buy as prices swing wildly high. At other times, it may be difficult to sell as Mr. Market may set prices irrationally low. As such, the Mr. Market analogy is typically applied to a long term buy-and-hold strategy. It is also associated with highly disciplined valuation methods and buying below intrinsic value as a margin of safety.
Overview: Mr Market
An analogy that paints the stock market as a moody partner who occasionally offers irrational prices.
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Next: Efficient Market Hypothesis

Behavioral Finance

This is the complete list of articles we have written about behavioral finance.
Animal Spirits
Bull Trap
Dumb Money
Falling Knife
Greed Is Good
Home Bias
Long Squeeze
Mr Market
Noise Traders
Sell On News
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