Dreman's Law

Dreman's Law, named after investor David Dreman, suggests that in investing, the stock market often underreacts to positive news and overreacts to negative news. This leads to mispricing of stocks, creating opportunities for savvy investors. In simple terms, when good news emerges, stocks might not rise as much as they should, and when bad news hits, they might drop excessively. Understanding this can help investors identify undervalued stocks and potentially profit when the market corrects itself. Essentially, it highlights the psychological biases that can drive market behavior.