Confusion de Confusiones

De la Vega, a merchant in Amsterdam, published this in 1688 as a set of four dialogues between a philosopher, a merchant and a shareholder, describing the trading of Dutch East India Company shares on the Amsterdam exchange. It is the earliest known book about stock market operation.

The descriptive content establishes how sophisticated the market already was. De la Vega describes forward contracts, options both to buy and to sell, margin trading, short selling, a settlement mechanism, and organised syndicates operating to move prices. He describes trading in fractional units created so that smaller participants could take positions, and the practice of rolling positions forward rather than settling.

The behavioural content is what makes the book still cited. De la Vega describes participants acting on rumour, the tendency of prices to move on news that has no bearing on the company's actual prospects, the effect of the crowd on individual judgement, the way bull and bear parties construct narratives to support their positions, and the observation that a participant who has taken a position becomes incapable of assessing evidence against it. He notes that news is interpreted according to the interpreter's position rather than on its merits.

His practical advice, given through the merchant character, includes never advising anyone to buy or sell shares, never taking a profit for granted, accepting that losses are part of the activity, and recognising that whoever tries to be clever in this market usually ends worse off.

The text is difficult, written in ornate seventeenth-century Spanish with extensive classical allusion, and the available English translations are abridged. Its value is the demonstration that market behaviour has not changed in three hundred and thirty years, which is either reassuring or dispiriting depending on the reader.