rational, so what went wrong?
The first thing to note is that the stock market does not always behave rationally. As John Maynard Keynes pointed out, the markets can remain irrational longer than you can stay solvent. This is especially true when a company constantly receives negative media attention as BP has. Investors become nervous and often will sell their shares in a company that is consistently in an adverse spotlight.
As well, the market typically dislikes uncertainty. When market analysts recommended investing in BP in early May, they assumed that the flow of oil into the Gulf of Mexico would soon stop. Many pointed to how Exxon’s stock performed after the Valdez disaster and uncategorically stated that BP’s situation would not be worse than this. However, there was no basis for this faulty assumption. The BP disaster has been worse and it is still uncertain when the flow of oil will cease. In addition, no one knows for certain what BP’s total cost in dealing
