Evan Frazier, CFA, CAIA
Senior Research Analyst
Frank Herbert’s science fiction novel Dune contains a litany which states that “fear is the mind-killer.” Indeed, anxieties brought on by periods of turmoil can cause individuals to forsake rational thinking and act impulsively, usually to their own detriment. This phenomenon often manifests itself in equity markets, particularly when investors choose to curtail or altogether abandon equity allocations amid (or in expectation of) steep declines in the prices of risky assets. These impetuous actions stem from various emotional biases held by market participants including loss-aversion, which describes the asymmetrical response many individuals feel with respect to gains and losses (i.e., investors derive more pain from a loss than pleasure from a gain of equal value).
The aim of this newsletter is to demonstrate that, save for a modicum of intangible psychological comfort, sales of risky assets motivated by fear and panic provide investors no value, and can ultimately have disastrous impacts on the long-term returns of a portfolio.
Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.
We respect your privacy. We will never share or sell your information.
If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.Contact Us >