Buttonwood: The wisdom of the laity

Posted: June 13, 2014 in economy
Tags: , ,

UK Only Article: 
standard article

Issue: 

Terror’s new headquarters

Fly Title: 

Buttonwood

Rubric: 

Retail investors are more influential than most people think

“FOLKS are dumb where I come from,” wrote Irving Berlin in the musical “Annie Get Your Gun”. The song’s condescension towards yokels is reminiscent of professional investors’ disdain for their retail counterparts. The “smart money” in New York and London thinks it can make a living exploiting the “dumb money” of people who live in the sticks. Yet a new paper from researchers at the Federal Reserve shows that retail investors—in America, at any rate—are a lot smarter than the professionals imagine. In fact, they have a bigger effect on the markets than the highly paid investment strategists of Wall Street.
Much of the economic literature assumes that ordinary investors are “noise” traders who deal at random (think of Nate Silver’s book “The Signal and the Noise”). They trade too often, it is thought, and are susceptible to behavioural biases such as over-optimism and loss-aversion.

Some trading will always …

via Economic Crisis http://ift.tt/1l6GfDu

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s