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Stock Market Labeling Implications

3 July 2007 - Features - Editor

Here is a brain teaser for today: what does the stock market have to do with sociology? The financial community is a microcosm of its own. Bulls and bears are the best known species of the stock market jungle, but those of us who have stayed in the ring for years know that there are many other stereotypes, some of which are even imaginary. Though it is widely appreciated that rumors and casual talk can make any stock market move in a most unexpected direction, application of the Labeling theory can help financial wizards see securities in new light. Such a perspective also helps to see short term stock market turbulence in balanced ways.

Criminologists use the Labeling theory to understand criminal minds, but though the stock market has a few of those, our purpose here is not as sinister. Labeling theory attempts to build empathy with deviance, a phenomenon with high profit potential in any stock market environment. A vital ingredient of successful Labeling theory application is to differentiate between unusual thinking and outright illegal activity, and it is this respect that the concept has such eminent stock market application.

Creative approaches to the business environment lie behind some of the best stock market successes known. This is not just in terms of innovative products and services but in new funding models and points of leverage as well. Stock options for employees, early retirement schemes for cost cutting, mergers and acquisitions for synergy, and stock splits to reward supporters, are some of the break through ideas which the Labeling theory can help to predict.

The lines between creativity and illegal tendencies are fine in stock market governance matters, so the theory has to be used with discretion. However, reflection will establish that executives tend to try and conform to expectations, though deviance in strategic matters can be beneficial if kept within the boundaries of law. Appreciation of entrepreneurial moves in the light of the Labeling theory can uncover some hidden treasures on the stock market. Do please share with us, any insights which you may have in this regard.

 


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