Behavioural finance
Searches for the word “ stocks ” on Google over 5yrs
100
75
50
25
Feb18 |
Aug19 |
Mar21 |
Sep22 |
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Source : Google Trends |
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Numbers represent search interest relative to the highest point on the chart for the given time . A value of 100 is the peak popularity for the term , 50 means the term is half as popular and 0 means there was not enough data for this term .
“ It is often at the extreme ends of an investment , either significantly rising or falling , that one ’ s objectiveness is tossed out of the window and it can be very easy to forget why you made the investment in the first place .”
Laying anchor Edward Allen , investment director at Tyndall , says the main example of cognitive bias he sees among his clients is that of anchoring , when investors remain focused on one piece of information , ignoring anything that will contradict it , even if the facts change . One example of anchoring can be seen when investors buy a stock that promptly plummets in value . While the fundamentals behind the original valuation may have changed – the company may have issued a profits warning that bodes poorly for its long-term future , for example – the investor will decide to hang on to the stock until it returns to the price they paid for it , even though they would be better off putting what is left of
Issue 92 - February 2023 / 9 /