0, 1 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 diagram 3 : highest and lowest real earnings on shares for different investment horizons 1918 - 1996 per cent years years - 2 - 9 - 20 - 40 - 36 - 60 1 year 5 years years years while many people definitely do adopt these strategies, based on proven experience, this is by no means the case for every household or individual. some clearly aim for the big deal and search in various ways for potential winners. this has been evident not least in recent years. day trading is a concept that has been coined to denote private attempts to make a quick profit from short - run dealing in shares. it and telecom shares became popular in the late 1990s as a growing number of people were attracted by these categories. less has been heard about these players recently, perhaps because falling share prices have led to losses. as i have indicated, without a sufficiently diversified portfolio, saving in shares entails risks that are unnecessarily large in the sense that they are not commensurate with expected profits. even so, a good many private investors have gone in for more risky strategies of this type. to my knowledge, there are unfortunately no studies that systematically illustrate more precisely how people in sweden have managed their saving in shares. a research paper from the united states points out that the it boom, combined with markedly lower transaction costs as a result of new technology, induced many inexperienced people to invest in shares. moreover, access to the internet leads to an increased number of share transactions, with poorer results. these less experienced players have tended to concentrate on the technology - oriented nasdaq exchange. whereas more professional and institutional investors account for 90 per cent of transactions on the new york exchange, approximately half of nasdaq dealing is by private individuals. american investors are also becoming younger ; the proportion who are under 35 and make more than six transactions a year rose from 1. 1 per cent in 1995 to 13. 2 per cent in 1998. the same tendency applies to stockbrokers and financial consultants, more than half of whom began their careers in the 1990s. all this indicates that large numbers of inexperienced investors entered the market in the 1990s and that a high proportion of their brokers and consultants unfortunately have relatively little experience. on the other hand, many of the newcomers working in financial markets have had a thorough training that is often better and – perhaps more important – more up - to - date than many of their older colleagues ’. the fact that

theoretical and empirical analysis. in the 1990s there were a number of bubble - like developments where prices ceased to mirror fundamental values. the one that comes to mind first is perhaps the it see de bondt, w. f. m. & thaler, r. ( 1985 ), does the stock market overreact?, j. of finance 40, pp. 793 – 805 ; also jegadeesh, n. & titman, s. ( 1993 ), returns to buying winners and selling loosers : implications for stock market efficiency, ibid. 48, pp. 65 – 91. cutler, d. poterba, j. & summers, l. ( 1991 ), speculative dynamics, review of economic studies 58, pp. 520 – 546. see e. g. tversky, a. & kahneman, d. ( 1974 ), judgement under uncertainty : heuristics and biases, science 185, pp. 1124 – 1131. shiller, r. ( 2000 ), irrational exuberance, princeton university press, new jersey. janis, i. l. ( 1982 ), groupthink ( 2nd ed. ), houghton mifflin co., boston. babad, e. ( 1987 ), wishful thinking and objectivity among sport fans, social behavior : an international j. of applied social psychology 4, pp. 231 – 240. bubble. another is the bond market ; in the early 1990s bond rates in many parts of the world declined to low levels and when the u. s. federal reserve then raised its instrumental rate at the beginning of february 1994, bond rates moved up sharply in the following months. to sum up, new interesting theoretical and empirical arguments have been put forward in the past two decades against the notion that financial markets are efficient. they show that via increased or decreased demand, investors may well pull financial prices away from their fundamental level. overreactions can occur so that excessive euphoria drives prices unduly high, just as undue pessimism can push them down too far. how can households benefit from stock markets? the combination of markowitz ’ approach to risk diversion and the efficient - market hypothesis meant that for a long time the best advice for saving in equity has been to build up and hold onto a broad portfolio that more or less mirrors the stock market as a whole. in that way, even an amateur could obtain the relatively higher yield