The Socionomic Theory of Finance

Discover the waves of social mood that affect every aspect of your life. They regulate the tone of politics, popular entertainment, the economy and the stock market. You can use these influences to your advantage. Society can't do it, but an individual can. You will learn to read the news in a completely different way. You may even start predicting the news. This book will open a whole new world to you. Many readers -- especially investors -- say it changed their lives. Find out why.

  • Format: Book - 800 pages | Online Book - 800 pages
  • Author: Robert Prechter

Special Offer: Get The Socionomic Theory of Finance FREE with a subscription to the Financial Forecast Service | With The Financial Forecast Service and Prechter's eye-opening book, you'll always be ready for what's next in U.S. markets. Learn more

A cohesive model with real-world application

The book draws a crucial distinction between finance and economics and ties both fields to human social behavior. Top reviewers across multiple disciplines have offered acclaim. Professor Terry Burnham calls it "the best book ever written on financial markets." In time, STF will transform the thinking of every individual in the world of finance. Read it and be among the first.

What Financial Professionals and Academics Say

The Socionomic Theory of Finance is the best book ever written on financial markets. It is humble & bold, broad & deep, and crystal clear yet mysterious.

This brilliant and vividly written book dispels countless myths and lays the foundation of a scientific theory of financial and macroeconomic causality. By reading it you will understand how socionomics works and why its aspects of testability, falsifiability and predictive ability set it apart from other theories. The book goes far beyond theory, boldly providing counterintuitive yet logically coherent explanations of real-world market activity and social trends, thereby providing a guide for interpreting history and even for anticipating it. You will likely find this book hard to put down, and I expect you will come back to it again and again, such is the wealth of insights found at every turn.

Socionomic theory is fresh and original. Whatever the ultimate verdict, a revolutionary new perspective and a basis for prediction are just what the social sciences presently need.

Bold, ambitious, counterintuitive, disquieting and original. This book challenges conventional wisdom that fails the test of empirical confirmation.

This book thoughtfully and exhaustively challenges the flawed logic behind conventional thinking as espoused by economists and financial experts every day. Point by point, it discredits their arguments on market causality and offers a compelling alternative. Academics and investment professionals would be wise to consider the extraordinary road map that STF lays out for them.

Unique and incisive. STF turns orthodox thinking upside down. A masterpiece.

A fascinating synthesis of social science research and sharp economic analysis. Prechter invites readers to think in (unexpected) ways that require some effort that is well rewarded. Anyone who contemplates our financial future should read and try to absorb the case put forth in this book.

This superb book should have a major impact on financial and economic theory. It is essential reading for anyone who wants to understand the real basis of financial markets.

It may be a cliché, but I could not put this book down. Prechter's flowing style and easy language make this a spellbinding book. The more you read the tighter it grips you, a bit like a spy novel. He challenges the long held beliefs of the efficient markets hypothesis and random walk, but rather than simply dismissing them with sweeping statements, he provides hard evidence of their worthlessness, then replaces them with the refreshing new theory of STF. Prechter argues his case with enthralling examples and compelling logic, making it difficult to disagree with. No single paragraph can do justice to this book. Start on page 1 and find out for yourself what it is all about.

What Recent Readers Say

I started reading Bob Prechter's new book The Socionomic Theory of Finance, and I have to say I BEYOND HIGHLY RECOMMEND IT. Bob does a masterful job in the first two chapters alone of completely debunking the entire exogenous causation theory of market analysis. It is a MUST READ for anyone who wants to truly have their eyes opened to how the market really works.

Over so many years I have struggled to formulate an alternative, empirically based methodology to macroeconomics and finance with little interest from my macroeconomic colleagues. Telling them that most of their preferred theories obtain little empirical support has been met with the standard answer that as long as my results are not supporting the same theories the former are of little interest! It has often felt like a desert walk. And, now, it seems Robert Prechter has written a book which apparently takes up the thread and produces a deep and convincing alternative to a field that too often has used empirical analyses to illustrate beliefs rather than to ask novel and important questions.

Your distinction between the equilibrium tendencies of economic markets and the disequilibrium zeal of financial markets is brilliant! Like any great idea, it’s one that when you learn of it your first reaction is, why didn’t I think of that?

This is an 800-page masterpiece. Let me put it to you this way, if you’ve read his earlier socionomics works, this one is 'The New Science of Socionomics on Steroids.'

The quality of the book is just amazing!

I have been a subscriber since 1983 and read many of your books. Your latest culmination is outstanding!

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From the jacket:

Bob Prechter Socionomic Theory of Finance back cover photoThe Socionomic Theory of Finance

The socionomic theory of finance (STF) proposes that economic and financial markets are fundamentally different. The differences, which manifest at both the individual and aggregate levels, arise from the opposing contexts of relative certainty in the economic marketplace vs. pervasive uncertainty in the financial marketplace. In economic markets, producers and consumers, due to knowledge of their own values, consciously apply reason to decision making, resulting in exogenously motivated objective pricing. In financial markets, speculators, due to ignorance of others' future actions, unconsciously apply herding impulses to decision-making, resulting in endogenously motivated subjective pricing.

The opposing motivations of producers and consumers cause economic markets to tend toward equilibrium, mean reversion and price stability, in a process regulated at the individual level by utility maximization and at the aggregate level by the laws of supply and demand. The unopposed motivations of speculators cause financial markets to tend toward dynamism in a process regulated at the individual level by spontaneous commands and at the aggregate level by the law of patterned herding. The pricing model for economic markets is the random walk. The pricing model for financial markets is a hierarchical fractal called the Wave Principle, described in the Elliott wave model. Neoclassical economic theory and, in finance, the efficient market hypothesis fail to discern all of these distinctions and inappropriately apply laws of economic causality to finance. STF is not a partial challenge to conventional formulations but rather is diametrically opposed to them in every major particular. STF aims to be both theoretically consistent and compatible with empirics.


Meet Your Author


Robert Prechter

Robert Prechter

Robert R. Prechter is known for developing a theory of social causality called socionomics, which he has elucidated in books and academic papers. In 1979, he founded Elliott Wave International, where he and his colleagues have applied and expanded upon R.N. Elliott's fractal model of financial pricing. Prechter graduated from Yale University. For more, visit robertprechter.com.

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