Yes, in the short term, stock investing is irrational. The price of a stock and the value of its company seem disconnected and crazy. The key phrase to remember is “short term”. A stock’s price and the company’s value become more logical over an extended period of time.
The longer a stock is in the public’s view, the more rational the performance of the stock’s price. In other words, a good company continues to draw attention to itself; hence, more people want its stock, and the share price rises to better match the company’s value. Conversely, a bad company doesn’t hold up to continued scrutiny over time. As more and more people see that the company isn’t doing well, the share price declines. Over the long run, a stock’s share price and the company’s value eventually become equal for the most part.