DEFINITION of 'Mr. Market '

Used as an allegory, Mr. Market is an imaginary investor devised by Benjamin Graham and introduced in his 1949 book, The Intelligent Investor. In the book, Mr. Market is a hypothetical investor who is driven by panic, euphoria and apathy (on any given day), and approaches his investing as a reaction to his mood, rather than through fundamental (or technical) analysis. Modern interpretations would describe Mr. Market as manic-depressive, randomly swinging from bouts of optimism to moods of pessimism.

BREAKING DOWN 'Mr. Market '

Investor and author Benjamin Graham invented Mr. Market as a clever means of illustrating the need for investors to make rational decisions in regard to their investment activities instead of allowing emotions to play a deciding role. Mr. Market teaches that although prices fluctuate, it is important to look at the big picture (fundamentals) rather than reacting to temporary emotional responses. Graham is also well-known for his most successful student, multibillion-dollar value investor Warren Buffett.

Greed and fear are now well-accepted hallmarks of advanced capital market systems. The herd behavior of these markets and the individuals populating them can at times gravitate to certain stereotypes. Mr. Market is one such archetype.

Legendary investor Warren Buffet, an ardent disciple of Benjamin Graham, is a frequent student of the book, The Intelligent Investor, particularly chapter 8 where Graham describes Mr. Market. Buffet's even gone on to consider the book the best book on investing ever written.

Stylistically, two other popular finance novels along these lines are The Confidence Man by Herman Melville, as well as The Money Game by Adam Smith, or George Goodman, who used Adam Smith as a pseudonym. The Confidence Man by Melville, who also wrote Moby Dick, used a written style best described as cultural satire and allegory, which confronted themes of identity, economic materialism, irony and cynicism.

RELATED TERMS
  1. Long-Term Growth (LTG)

    Long-term growth (LTG) is an investing strategy and concept in ...
  2. Net Current Asset Value Per Share ...

    Net current asset value per share (NCAVPS) is a measure created ...
  3. Mr. Copper

    Otherwise known as Yasuo Hamanaka, Mr. Copper was a trader in ...
  4. Investment Analysis

    Investment analysis involves researching and evaluating securities ...
  5. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  6. Fundamental Analysis

    Fundamental analysis is the method of analyzing and evaluating ...
Related Articles
  1. Managing Wealth

    Benjamin Graham: The intelligent investor

    Benjamin Graham, while best known as Warren Buffett's mentor, was a legendary investor in his own right. Learn more about his story.
  2. Investing

    Benjamin Graham's 3 Most Timeless Investment Principles

    Investor Benjamin Graham pioneered cutting edge concepts that propelled other top investors to fame. Find out what are his three main investment principles.
  3. Investing

    3 Differences Between Benjamin Graham and Warren Buffett

    Analyze three key differences between Warren Buffett and Benjamin Graham. Learn how value investing principles were applied differently by each investor.
  4. Investing

    5 Great Investors Who Aren't Warren Buffett

    Here are five other investors, not named Warren Buffett, that are also considered to be the best of the best in the industry.
  5. Financial Advisor

    20 Must-Read Books for Finance Professionals

    These 20 books offer insight into the past and present worlds of finance and how financial professionals can improve their business.
  6. Investing

    Take On Risk With A Margin of Safety

    More common risk theories can lead to missed opportunities. Find out how margin of safety can propel your portfolio.
  7. Investing

    Ben Graham on Interpreting Financial Statements

    Seven pieces of advice from Benjamin Graham on understanding financial statements.
  8. Investing

    Value Investing: Why You're Doing It Wrong

    Benjamin Graham, the original value investor, would be 123 today. He might not like what he sees.
  9. Investing

    Top 5 all-time best mutual fund managers

    The best managers produced long-term, market-beating returns and helped investors build big nest eggs. Find out who made the cut.
RELATED FAQS
  1. How did Warren Buffett get started in business?

    Warren Buffett may have been born with business in his blood, but it was a brush with Benjamin Graham that put him on his ... Read Answer >>
  2. How does Warren Buffett choose his stocks?

    Investors have long praised Warren Buffett’s ability to pick great companies to invest in. Here are the key considerations ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center