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In this post I hope to explain the basic premise behind a behavioral economic theory that I have composed. While I have not yet searched for quantitative evidence to demonstrate the extent to which it would affect markets, I believe that the principles behind my logic are upheld by fundamental concepts within behavioral economics. A brief search of the endowment effect will explain the basic premise as described by Richard Thaler: ‘This pattern—the fact that people often demand much more to give up an object than they would be willing to pay to acquire it (Thaler, 1980).” As humans, we tend to assign more value to the items to which we assign ownership. This is seen in the form of pride. It has been shown that stocks that outperform for a period of time continue to outperform. The fundamental basis of what drives price upward is that there are fewer sellers than buyers. The endowment effect contributes to the dearth of sellers. Those who own the outperforming stock feel pride ...

More than two months ago I wrote my first blog post on Gopro’s inability to innovate. I commented on their historically botched launches and how based on their track record I did not believe that they would be able to launch their drone, Karma, on schedule. On May 5, 2016 during their Q1 earnings call, my analysis came to fruition. During the call CEO Nick Woodman stated, “While we've made great progress on many initiatives, unfortunately, there is one where we won't deliver, the first half of 2016 launch of our drone, Karma.” He continues to state that due to it’s many, “revolutionary features that differentiate it from other drones,” they have to delay launch until the holiday season. The Karma drone has been in the works for nearly a year now and a major red flag besides the delay is that Woodman did not care to name any of the 'revolutionary' features that the drone is going to include. With an already expansive drone market including some well established br...