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Rekenthaler Report

When Rules of Thumb Fail

Taking shortcuts appears to harm the sell decision.

Faulty Exits
Tuesday’s column discussed a research paper, “Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors,” that shows managers to be more adept at buying U.S. stocks than at selling them. Per the authors’ analysis, the managers’ new purchases outperformed their existing holdings (before expenses were considered) over the ensuing 12 months.

(The paper, which is in its draft stage, is authored by Klakow Akepanidtaworn, Rick Di Mascio, Alex Imas, and Lawrence Schmidt. Its title riffs on this book, from Nobel Laureate Daniel Kahneman.)