There is a great danger in getting too carried away simply with share price movements. We have been saying that traders need to concentrate less on share price and more on fundamentals of business. But investors must try and think beyond that. The whole point about buying a share is that you should be interested in the underlying business - you should take as much interest as if you were buying a house or a car. Dr Lux created with Michele Marchesi at the University of Cagliari, Italy, has two types of traders.
Noise traders make their money more quickly.
But as more join the herd and follow the trend, the share price can be pushed far from its true worth, causing booms or crashes. At that point, fundamentalists step in and bring the share price back towards it underlying, true value. The model shows that the market gets volatile when the number of traders acting as noise traders gets to a critical proportion. The research is published in the journal Nature. The BBC is not responsible for the content of external internet sites.