The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors
Published: 08/11/2023 | DOI: 10.1111/jofi.13271
KLAKOW AKEPANIDTAWORN, RICK DI MASCIO, ALEX IMAS, LAWRENCE D.W. SCHMIDT
Are market experts prone to heuristics, and do these heuristics transfer across buying and selling domains? We investigate this question using a unique data set of institutional investors with portfolios averaging $573 million. A striking finding emerges: While there is evidence of skill in buying, selling decisions underperform substantially, even relative to random‐selling strategies. This holds despite the similarity between the two decisions in frequency, substance, and consequences for performance. Evidence suggests an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: We document a systematic, costly heuristic process for selling but not for buying.