- We can't pay attention to everything, which causes investors to make systematic mistakes
- Lack of attention causes investors to pay too much for Aim shares and new flotations, and too little for momentum stocks
There is a contradiction at the heart of economics – one that explains why some shares are overpriced and others underpriced, and why investors make systematic errors.
One of the most basic and commonsense ideas in economics is that people economise on the use of scarce resources: this is why we have turned down the thermostat as gas prices have soared.