George Soros Financial Investment Thought

Despite others' divarication from different value judgment, George Soros, a legendary person with unique insight, has made unimpeachable investment success in the modern financial market.Starting from the inexistence of "perfect logos" , Soros criticized the hypothesis of "efficient market" and its stance of Scientism in the traditional financial theory. Therefore he developed his fallibility-based "reflexive disequilibrium market" theory and animadverted on the "laissez-faire doctrine" -based "financial globalization" as a "market fundamentalism" because this view exaggerates the market merits. Soros takes financial investment decision for a process of "financial alchemy " which go in for "temporary profit" but not for "scientific generalization" , he believes the development of the market is a falsificational course of evolutional rationality; therefore he cares for the inefficiency of market and focuses on the objection of market institution.If we acknowledge that Soros's success is not accidental, we may not ignore his financial investment thoughts under which played a role of guidance in his investment practice. Based on the whole development of financial investment thoughts and document comparison, this thesis uses cross-sectional and longitudinal studies and thereafter conducts an all-around investigation into Soros's financial investment thoughts. Especially in virtue of behavioral finance theory, the author investigated the logistic process and methodology of Soros's investment thoughts, explored the innovative source of Soros's excess profit and described the nature of his financial investment thoughts as a kind of practical theory which possess dialectical, practical and critical characteristics.After employing Soros's thoughts to anatomize Chinese stock market, the author gives a general comment on his financial ideology.The dissertation is composed of eight chapters.Chapter One is the introduction. The content covers the significance of studying Soros's thoughts, biography, challenge and contribution to the modern financial investment studies. At the same time, this chapter alsoexplained the aim of this study, the method employing and the organizational structure of the whole paper.As a comprehensive chapter for the paper, Chapter Two firstly introduces the history and genre of financial investment ideology in order to find the background for studies on soros's investment thoughts. Then we address the proposal and general idea of Soros in his comment on financial investment and market. After a survey of the relevant literature on soros study, this chapter traces the source of soros's thoughts which can be find from Hayek and Popper.Chapter three analyzes and summarizes the foundation of Soros'sinvestment thoughts--"cognitive fallibility". Fallibility is a new conceptthat Soros proposed and this concept is different from the conventional economic rationality. Soros constructs all his Weltanschauung and financial thoughts on this base. From the "fallibility in common sense" of 1987,to the "radical Fallibility" in 1998, the process not only embodied a two-phase feature in his thoughts developing, but also symbolized a practical sublimation in his financial investing. Combined with the discovery of behavioral finance and contrasted with the conventional financial study, this chapter reasoned Soros's concept and logic, besides , we discuss itssignification in decision making from three layers--personal anticipation;market pricing and institutional evolution.Chapter four catches on the core of Soros's financial thoughts--the'reflexivity of the market'. Pricing fluctuation, which symbolizes the reflexivity between anticipation and reality, is not only the kernel of Soros's financial thoughts, but also leads to his 'trends trading' investment methodology. Using the new concept of reflexivity, Soros imported the human factor into financial analysis, considering the human's behavioring error, the marketing equilibrium become unstable. In this part we analyzed the relations between fallibility and reflexivity, we also discussed the framework of 'dynamic disequilibrium' market by which Soros was good at to set up his investing suppose.Chapter five probed into the investment methodology of 'financialalchemy' named by Soros. In this chapter we investigated the consistency ofhis financial thoughts and practice, therefore we concluded that the so-called"alchemy" was nothing but 'trading the error' which inherited fromPopper's falsificationism methodology of 'trail the error'. Meanwhile, wediscussed Soros's attitude towards risk control and the three kind of specific strategy he performed in market.Chapter six, based on 'prospect theory' of behavioral finance, we anatomize soros's key strategy of "trading the trends" . Firstly we analyze the common ground of behavioral finance and soros's viewpoint. Then, using the 'reference point effect' , we deciphered how a mass of dispersive individual bias can be synthesized into a 'prevail bias' and how can this kind of bias finally lead to the "trends in the market" . Moreover, we ascertained the reasons and necessity of 'stop loss' plus 'cross trading' in tracing trends.Chapter seven, warnings and illumines of Soros's financial thoughts to Chinese stock market. In this chapter, we use Soros's framework and thoughts to survey the Chinese market and study the applicability of his ideas in Chinese market.Chapter eight is the overall summary of Soros' s investment thoughts. We give a general evaluation to Soros' s financial thoughts. In one hand, we drew features of Soros's financial thoughts as a practical theory; in the other hand we deduced the worthiness of the outstanding prescriptive analysis in his theory that can be cast to the real market.