Should We All Be Buying Stocks?

The stock markets are gyrating; the financial crisis continues unabated. While some of us are shrieking, “All hope is lost!” others are watching the chaos and saying, “Great time to buy stocks!” That’s where University of Chicago finance professor John Cochrane comes in, sorting 30 years of research by behaviorists, efficient marketers, and economists in a Wall Street Journal Op-Ed to offer some advice to investors. His conclusion—though he warns that “history is no guarantee”: “If you’re less leveraged, less affected by recessions, and have a longer horizon than the average, it makes sense to buy. If you’re more leveraged, more affected by recession or have a shorter horizon, it might be the time to sell, even though you might be cashing out at the bottom. If you’re about the same as everyone else, do nothing and relax. If you’re wrong, at least you will have excellent company.”