The structure of the stock mrket is very different today from what it was 50 years ago, but the behavior of the investors in it is still very much the same.

The stock market of the late 1920s was not just speculative, but larcenous as well. Morality declined as stock prices rose and manipulation of those stock prices became all too common. The financial establishment of the day was shaken to its foundations when even Richard Whitney, president of the New York Stock Exchange, went to jail.

That spectacle of avarice in action led to a major change in the structure of investing. Congress created the Securities Exchange Commission to eliminate the more blatant abuses of the investment business, a function it has performed very effectively since. The SEC has not made folks more honest, but it has ensured that today's investor is better informed and is less likely to be swindled than the investor of the 1920s.

The bull market of the 1920s was fueled by credit in the form of margin debt. Investors could borrow up to 90 7/8 of the price of a stock, so only a small decline in stock prices created a large decline in investor wealth. That decline in investor wealth withdrew spending power from the economy and helped magnify the econony's collapse. By contrast, today's investors can borrown no more than 50 per cent of the value of their stocks and total margin debt is only about one percent of the total market value of common stocks.

The stock market of the 1920s was an invididual one, but institutional investors play a much larger role today. Pension funds, mutual funds, insurance companies, bank trust departments and other institutions currently control about half of the stock on the New York Stock Exchange and account for about two-thirds its volume.

The most recent change in the structure of the stock market is in brokerage commissions. Commission rates were fixed at roughly one percent for two centuries, but they became negotiable by order of the SEC in 1975. Today an individual investor can save more than 50 percent on brokerage rates and an institutional investor can save even more.

But while these structural changes have taken place in the stock market, the emotions of greed and fear have remained the investor's foundation. In euphoric periods such as the 1920s, greed predominates and caution is thrown to the winds. In troubled periods such as the 1930's and 1970's, fear predominates and caution is retrieved from where it was thrown.

Regardless of whether greed or fear prevails at the time, investors tend to think it will continue forever. Investors in the 1920s thought that the boom would go on indefinitely and, even a year after the stock market crash in October 1929, few realized that the worst depression in history was unfolding. Optimistic investors in the late 1960s thought that the market would continue to rise into the soaring 70s, a view that seems naive now with the advantage of hindsight.

The same tendency to project the trends and moods of the immediate past into the indefinite future exists during bear markets too. When the stock market hit its bottom in 1932, the prevailing mood was pessimism tinged with panic. As J.K. Galbraith observed later, "the end was at hand but was not in sight." A similar mood of pessimism tinged with exhaustion exists among today's institutional investors who have experienced a decade of disappointment in equities. The opinion that the unrewarding trend in stocks will continue indefinitely is reflected by the title of a recent cover story in Business Week -- The Death of the Equities.

Investors still have a remarkable capacity to rationalize almost any level of the market. When stock prices were low in the 1950s, investors said it was because depressions always follow wars. When stocks were high in the 1960s, investors said it was because the fine tuning of Keynesian economists had eliminated the worry of recession and the threat of depression. Investors called stocks risky when they yielded more than bonds, then called them growth vehicles when they yielded less.

Since investors tend to think and act under the influence of crowd psychology, there is always room for the perceptive investor with nerves of steel who can stand aloof from the madness of the moment and exploit it when it goes to extremes. In theory, this role is played by institutional investors whose education, experience and research capicity give them an advantage over individuals. In practice, institutional investors often do worse than individuals and tend to be victims of their own varieties of group-think. The two-tier market of 1972-73 that overvalued quality growth stocks was the institutional investors' equivalent of the Dutch tulip-bulb mania.

An historian who observed these recurring fashions and patterns in investor behavior might be tempted to invoke Santayana's admonition, "Those who do not remember history are condemed to repeat it." This is not the case with investors, because virtually every investor bases his actions on the lessons he has learned. The problem is that, in investing as in other aspects of human behavior, history offers and abundance of lessons but an absence of guidlines to use in choosing which lesson is relavant in any particular situaion.