Epsilon Theory

Epsilon Theory is a framework for understanding market behavior and decision-making, emphasizing that much of finance is driven by the narratives and emotions of participants rather than just fundamental data. It posits that investors are influenced by collective psychology and social dynamics, leading to patterns of behavior that can distort markets. The term "Epsilon" suggests small, often overlooked factors that have significant impacts on outcomes. By recognizing these influences, investors can better navigate complex market environments and make more informed decisions. Ultimately, it highlights the importance of story and perception in finance.