154 THE GENERAL THEORY OF EMPLOYMENT BK. IV

investments, which are obviously of an ephemeral andnon-significant character, tend to have an altogetherexcessive, and even an absurd, influence on the market.It is said, for example, that the shares of Americancompanies which manufacture ice tend to sell at a higherprice in summer when their profits are seasonally highthan in winter when no one wants ice. The recurrenceof a bank-holiday may raise the market valuation of theBritish railway system by several million pounds.

(3) A conventional valuation which is establishedas the outcome of the mass psychology of a largenumber of ignorant individuals is liable to changeviolently as the result of a sudden fluctuation of opiniondue to factors which do not really make much differ-ence to the prospective yield; since there will be nostrong roots of conviction to hold it steady. In ab-normal times in particular, when the hypothesis of anindefinite continuance of the existing state of affairsis less plausible than usual even though there are noexpress grounds to anticipate a definite change, themarket will be subject to waves of optimistic andpessimistic sentiment, which are unreasoning and yetin a sense legitimate where no solid basis exists for areasonable calculation.

(4) But there is one feature in particular whichdeserves our attention. It might have been supposedthat competition between expert professionals, pos-sessing judgment and knowledge beyond that of theaverage private investor, would correct the vagaries ofthe ignorant individual left to himself. It happens,however, that the energies and skill of the professionalinvestor and speculator are mainly occupied otherwise.For most of these persons are, in fact, largely con-cerned, not with making superior long-term forecasts ofthe probable yield of an investment over its whole life,but with foreseeing changes in the conventional basisof valuation a short time ahead of the general public.They are concerned, not with what an investment is