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When markets move as one: The hidden forces driving collective investing behaviour
Why do markets dip after the clocks change? Why do investors become more risk averse in the fall? And what does this mean for your portfolio? We like to think we’re rational investors. We’re not. On the latest episode, professor Lisa Kramer explores how hidden behavioural biases influence our portfolios — and even shift global markets.
Show notes
Show notes
[0:00] Humans tend to overestimate our abilities. We tend to think of ourselves as better than average.
[0:33] Meet Lisa Kramer, a professor of finance at the University of Toronto, and an expert in the psychology of financial decision-making.
[1:20] While thinking we’re better than average benefits us in certain situations — think dating and job hunting — it can be detrimental to our finances.
[2:13] This over-confidence is clearest when people try to outperform the stock market.
[2:56] But beyond internal biases, there are also external factors that influence our financial decisions.
[3:19] Lisa and her colleagues studied how the clock changes influenced the market as a whole and found that the day after the clocks changed, stock markets tumbled. But why?
[5:30] Seasonal changes — like the shift to winter — also make us more risk averse, en masse.
[7:16] Lisa’s research shows this isn’t just in the stock market; investors sought out safer products, like mutual funds and treasury bonds, in the winter.
[8:44] What does this mean for companies?
[9:28] Will AI save us (hint…not so much).
[10:29] And can the average investor do anything to mitigate these biases (hint…not so much).
[12:30] “The best we can do is educate people that these are common biases, and get people to think about decisions that they've made in their own lives and self-evaluate the extent to which maybe they've been subject to these biases.”
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By Rotman School of ManagementWhy do markets dip after the clocks change? Why do investors become more risk averse in the fall? And what does this mean for your portfolio? We like to think we’re rational investors. We’re not. On the latest episode, professor Lisa Kramer explores how hidden behavioural biases influence our portfolios — and even shift global markets.
Show notes
Show notes
[0:00] Humans tend to overestimate our abilities. We tend to think of ourselves as better than average.
[0:33] Meet Lisa Kramer, a professor of finance at the University of Toronto, and an expert in the psychology of financial decision-making.
[1:20] While thinking we’re better than average benefits us in certain situations — think dating and job hunting — it can be detrimental to our finances.
[2:13] This over-confidence is clearest when people try to outperform the stock market.
[2:56] But beyond internal biases, there are also external factors that influence our financial decisions.
[3:19] Lisa and her colleagues studied how the clock changes influenced the market as a whole and found that the day after the clocks changed, stock markets tumbled. But why?
[5:30] Seasonal changes — like the shift to winter — also make us more risk averse, en masse.
[7:16] Lisa’s research shows this isn’t just in the stock market; investors sought out safer products, like mutual funds and treasury bonds, in the winter.
[8:44] What does this mean for companies?
[9:28] Will AI save us (hint…not so much).
[10:29] And can the average investor do anything to mitigate these biases (hint…not so much).
[12:30] “The best we can do is educate people that these are common biases, and get people to think about decisions that they've made in their own lives and self-evaluate the extent to which maybe they've been subject to these biases.”