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Comment by FridgeSeal | Hacker News Reader

In other words: your share price is a function of the emotions of fickle investors and their expectations (regardless of plausibility) rather than how well your company actually did.

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Share price is an estimation of future performance, not past or current performance. Specifically it's supposedly the net present value of all future cash flows, discounted appropriately.

How do you respond to the comments of stock market investors that suggest the market is frequently irrational?

The market is inherently volume-weighted, and there is much more "smart money" than "dumb money".

To give an example of something a smart investor would do, Warren Buffett supposedly only invests in industries he understands in depth:

http://www.investopedia.com/articles/05/012705.asp

What proportion of investors would you suggest show such restraint? Over half?

The proportion of "investors"? Low. The proportion of market capital allocation, among people doing active allocation for long-term buy and hold strategies? Very high.

No. The change in your share price is a function of the change in how well your company is expected to do. The absolute value still corresponds to how well you're doing/expected to do.

Well, yes, but that's not the point being made: the stock market aggressively prices in expectations ahead of time to avoid losing money. The reason the stock goes down is because the gain is already priced in!

That applies to pretty much all domains. From choosing an employer, restaurant, movie, car to choosing an editor, programming language, keyboard, etc. Humans, some more so than others, trick themselves into thinking they are rational, or that their decisions are firmly grounded.

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