"On vilinää melskettä, helinää helskettä pienten tiukujen..." Joulu lähestyy hyvää vauhtia ja on jälleen aika kurkistaa sijoitussalkun uumeniin. Syödäänkö tänä jouluna jalokalaa vai valtaako joulupöydän turska?

Varovainen ensinuuhkaisu antaa viitteitä ettei tänä jouluna tarvitse kitsastella pöydän antimien kanssa. Tarkempi tarkastelu nimittäin paljastaa salkun lihoneen edelliseen katsaukseen nähden +8,33% eli 4 582,05€! Tästä turpoamisesta pari tuhatta on uutta lisättyä pääomaa ja loput noin kaksi ja puolituhatta sijoitusten arvonnousua.

Kuukauden aikana kehitys on ollut vahvaa. Salkun indeksoitu ydin tuotti kuukaudessa +4,31%, mitä voi pitää erittäin hyvänä. Siitäkin huolimatta satelliittistrategiani pesi jälleen mennen tullen korkeariskiset (paino kehittyvissä maissa) indeksisijoitukset. Käyttämäni strategia nimittäin tuotti yhden prosenttiyksikön enemmän eli +5,31%.

Minua suorastaan hämmästyttää, että strategia jaksaa päihittää indeksituotot kuukaudesta toiseen ja vielä selvällä erolla. Vaikka menetelmä jälkitestauksessa löikin vertailuindeksin kymmenenä vuotena yhdestätoista luulisi alituottoja indeksisijoituksiin nähden tulevan kuukausitasolla useammin. Kenties minulla vain on uskomaton munkki? Satelliittisalkku on nyt hajautettu 14 osakkeeseen ja yhteen warranttiin (kts. edellinen postaus).

Allokaatiossa on tapahtunut tavanomaista enemmän muutoksia kuukauden aikana. Satelliittien osuus kasvoi 3%-yksikköä johtuen muita paremmasta kehityksestä ja uudesta lisätystä pääomasta. Brasilian, Kiinan ja Suomen painoarvot laskivat johtuen heikosta kehityksestä. Näistä Brasilian paino tippui kaksi prosenttiyksikköä ja muiden yhden. Sen sijaan Venäjän paino pysyi paikoillaan ja USA:n jopa nousi yhdellä prosenttiyksiköllä.

Tähän aikaan vuodesta lehtien sivut täyttyvät seuraavan vuoden osakekehityksen arvailijoista. Konsensus tuntuu olevan vain maltillisen nousun puolesta länsimaissa. Ilmassa kun on edelleen paljon epävarmuutta, niin elvytyksen tehon, kuin eri euromaiden velkaantumisen suhteen. Puhumattakaan valuuttasodasta, Korean mahdollisesta sapelien kolistelusta ja niin edelleen.

Itse katson asiaa eri tavalla. Niin kauan, kun ympärillä velloo tämän kokoluokan ongelmia on tarjolla mahdollisuuksia hyviin tuottoihin. Siinä vaiheessa, kun maailma ympärillä näyttää olevan yhtä aurinkoa (no sitä se ei ole oikeasti koskaan, koska aina on jotain ongelmia) alkaa kurssinousun huippu olla lähellä. Silloin uskaltavat sijoittaa nekin, jotka tällaisina aikoina piiloutuvat korkoihin tai muihin vähäriskisempiin sijoituksiin. Sekä tietysti he, jotka ovat lukeneet lehdistä useita vuosia kestäneestä osakkeiden noususta. Silloin ovat kyydissä ns. kaikki mahdolliset tahot ja nousun jatkoeväät syöty tai ne ovat ainakin vähissä.

Epävarmuus tarkoittaa minulle hyviä ostotilaisuuksia ja keskimääräistä parempia tuottomahdollisuuksia. Siksi epävarmuus ei ole mörkö vaan signaali siitä, että kannattaa sijoittaa. Hyvien sijoitusten pohja luodaan silloin, kun tilanne ympärillä näyttää pahalta. Ja epävarmuutta näyttää vielä riittävän. Tämän johdosta en pelkää vaan katson luottavaisesti tulevaan.

Rauhallista Joulua tasapuolisesti kaikille!

Yhteenveto

Salkun arvo joulukuu 2010: 59 562,04€
Muutos edelliseen katsaukseen: 4 582,05€
Vuoden 2010 tavoite ylitetty 36 886€:lla.
Vuoden 2011 tavoite ylitetty 27 445€:lla.

Vuoden 2012 tavoite ylitetty 16 871€:lla.

Vuoden 2013 tavoite ylitetty 5 028€:lla.

(Kuva cc Jar0d)

Olen käyttänyt Lynxiä välittäjänä parin kuukauden ajan. Nyt törmäsin ensimmäiseen ongelmaan. Itse asiassa ongelma koskee aivan yhtä lailla Interactive Brokersin asiakkaita, sillä Lynx on käytännössä sama kuin IB UK, mutta eri hinnoittelulla. Ongelma itsessään on sen verran harvinaislaatuinen etten usko kovinkaan monen siihen törmäävän. Se on silti hyvä tuoda ilmi, jotta Lynxin ja IB:n käyttäjät osaavat tällaiseenkin varautua.

Omistan satelliittisalkussani yhtä espanjalaisyhtiötä, joka hiljan fuusioitui yhdysvaltalaisen yrityksen kanssa. Ylimääräisessä yhtiökokouksessa tähän fuusioon liittyen hyväksyttiin toimenpide, jossa vanhoille espanjalaisen yhtiön osakkeenomistajille annettiin 11 ostowarranttia 10 omistettua osaketta kohden.

Tällä viikolla warrantit tupsahtivat Lynxin tilille ja kaupankäynti niillä käynnistyi eilen Madridissa. Warrantti kyllä näkyy Lynxin tilillä, muttei laisinkaan portfolio välilehdellä TWS:ssä (Lynxin ja IB:n kaupankäyntiohjelmisto). Lisäksi warrantin arvoksi oli kirjattu suoraan sen strike price. Näin salkun arvo kirjaantuu Lynxille väärin. Lynxin kaupankäyntijärjestelmästä ei warranttia löydy, joten sen myyminen tai uusien ostaminen ei onnistu. Arvelin jo tässä vaiheessa, että ongelmia on edessä.

Niinpä otin yhteyttä asiakaspalveluun selvittääkseni miten voin myöhemmin halutessani purkaa tämän johdannaisposition. Vastaus oli erilainen kuin mihin olin valmistautunut. Lynxillä (ja IB:llä) voi Madridin pörssissä käydä kauppaa ainoastaan osakkeilla. Euroopassa warranteilla voi käydä kauppaa pelkästään Saksassa. Tämä itse asiassa käy ilmi myös IB:n kotisivuilla.

Olen nyt siis tilanteessa, jossa omistan ostowarrantin enkä voi päästä siitä eroon. Joudun pitämään sen maturiteettiin saakka, jolloin lopulta selviää raukeaako se kenties arvottomana. Toinen vaihtoehto on, että osakekurssi on noussut yli strike pricen, jolloin erotus maksetaan tilille.

Aikamoinen lottokuponki! Salkussani on johdannaispositio, jota en siellä välttämättä haluaisi pitää. Vielä ongelmallisemmaksi tilanteen tekee se, että osakkeen hinta luonnollisesti tippui, kun warrantti hinnoiteltiin kurssiin. Osakkeen arvo hankintahintaan nähden on nyt tappiolla, mutta warrantin arvo huomioituna kokonaispositio yhtiöstä on reilusti plussalla. Harmi vain etten niin halutessani voi kokonaispompsista päästä eroon. Voin myydä pelkät osakkeet.

Lisäksi warrantti vaikuttaa myös käyttämääni sijoitusstrategiaan, jossa pidän osaketta aina yhden vuoden ajan. Salkkuun tupsahtaneen ostowarrantin juoksuaika on nimittäin 3,5 vuotta! Onneksi warrantin paino salkussa on vain pari prosenttia. Siitä huolimatta se on inhottava särö strategiassa.

Warrantti itsessään ei istu strategiaan, mutta pitäisin sen silti salkussa vaikka myynti olisi mahdollinen. Osakkeen hinta on tällä hetkellä 22,5% strike pricen alapuolella. Juoksuaikaa on jäljellä hyvin runsaasti eli sen 3,5 vuotta. Osakkeen volatiliteetti on suuri, yli 50%. Luonnollisesti warrantti on tällä hetkellä out-of-money tilassa ja sen koko arvo perustuu siten aika-arvoon. Koska itse en voi warranttia myydä on siitä minulle iloa vasta, jos se siirtyy in-the-money tilaan ennen maturiteettia.

Laskin warrantin arvon ennen sen noteerauksen alkamista käyttäen Black-Scholes kaavaa. Ensimmäisenä noteerauspäivänä warrantin hinta oli alimmillaan 0,10 eurossa ja korkeimmillaan 0,40 eurossa päätyen 0,30 euroon. Tänään warrantti päätti 0,36 euroon. Omien laskujeni perusteella warrantti on yhä alihinnoiteltu ja 0,10 euron hintaan olisin ostanut sitä kirkuen! Ja joku kehtaa vielä väittää markkinoita tehokkaiksi?

Jotta warrantti siirtyisi in-the-money tilaan tulisi osakkeen arvon nousta 3,5 vuoden aikana noin 7,5% p.a. mitä voi pitää kohtuullisena. Pidän yhtiötä muutoinkin edullisesti hinnoiteltuna (miksi muuten olisin ostanut sitä?). Esimerkiksi yhtiön P/B on reilusti alle yhden - 0,71 ja ROIC 54,73%. Uskon osakkeen arvon olevan 3,5 vuoden kuluttua selvästi strike pricea korkeammalla.

Siinä mielessä mitään katastrofia ei kohdallani ole tapahtunut, sillä yhtiötä haluan holdata edelleen ja ostowarranttia pidän myös hyvänä. Ainut missä töksähtää on se, että 10 kuukauden kuluttua irtaudun tästä osakkeesta ja silloin haluaisin myydä myös warrantin - käyttämäni strategian mukaisesti.

Nyt se ei onnistu, joten salkkuun jää lottokuponki, jonka tulos selviää vasta 3,5 vuoden kuluttua.

(Täysin mahdotonta warrantin myyminen ei tietysti ole. Voin aina siirtää sen jollekin toiselle välittäjälle, jonka kautta voisin käydä warranttikauppaa Espanjassa. Kulut huomioiden se ei kuitenkaan ole järkevää.)

(Kuva cc doug88888)

Tämä on viimeinen osa käyttäytymisperusteisen rahoituksen eli behavioral financen kirjoitussarjasta. Sarjan ensimmäinen, toinen ja kolmas osa on luettavissa oheisista linkeistä. Tekstin on kirjoittanut Oulun yliopiston rahoituksen professori Hannu Kahra ja se perustuu pitkälle John Nofsingerin kirjaan Psychology of Investing.

2.9 Mental accounting

Businesses, governments, and even churches use accounting systems to track, separate, and categorize the flow of money. People, on the other hand, use a mental accounting system. Imagine that your brain uses a mental accounting system similar to a file cabinet. Each decision, action, and outcome is placed in a separate file folder in the file cabinet. The folder contains the costs and benefits associated with a particular decision. Once an outcome is assigned to a mental folder, it is difficult to view that outcome in any other way. The ramifications of mental accounting are that it influences your decisions in unexpected ways.

 

Consider the following example.

 Mr. and Mrs. J have saved $15,000 toward their dream vacation home. They hope to buy the home in five years. The money earns 4 percent in a money market account. They just bought a new car for $11,000 that they financed with a three-year car loan at 9 percent.

This is a common situation. People have money in savings that earns a low rate of return yet borrow money at a high interest rate, thus losing money. In this example, the vacation home savings in the money market account is earning a rate of 4 percent. Imagine how excited Mr. and Mrs. J would be if they found a safe investment earning 9 percent! But when the 9 percent opportunity came up, they probably didn't even consider it. That opportunity was to borrow the $11,000 from their own savings (instead of the bank) and pay themselves a 9 percent interest rate. If they had done this, the vacation home savings in the money market account would have been more than $1,000 higher at the end of the three years.

Money does not come with labels, so people put labels on it. We've designated dirty money, easy money, free money, and so on. Mr. and Mrs. J labeled their savings as "vacation home" in a mental account. Although mixing the "new car" mental account with the "vacation home" account would have maximized their wealth, Mr. and Mrs. J could not bring themselves to do it.


2.9.1 Mental budgeting

People use financial budgets to keep track of and control their spending. The brain uses mental budgets to associate the benefits of consumption with the costs in each mental account. Consider the pain (or costs) associated with the purchase of goods and services to be similar to that of the pain of financial losses. Similarly, the joy (or benefits) of consuming the goods and services is like the joy of financial gains. Mental budgeting matches the emotional pain to the emotional joy.


2.9.2 Matching costs to benefits

People usually prefer a "pay-as-you-go" payment system because it provides a tight match between the benefits and costs of the purchase. However, things get more complicated when the pay-as-you-go system is not available.

Consider the following set of questions that investigate the timing of payments. Professors Drazen Prelec and George Loewenstein asked 91 visitors to the Phipps Conservatory in Pittsburgh the following questions. The first question is this.

Imagine that six months from now, you are planning to purchase a clothes washer and dryer for your new residence. The two machines together will cost $1,200. You have two options for financing the washer/dryer:
A. Six monthly payments of $200 each during the six months before the washer and dryer arrive.
B. Six monthly payments of $200 each during the six months be- ginning after the washer and dryer arrive.

Which option would you choose? Note that the total cost is the same in both options; only the timing of the costs is different. Of the 91 people interviewed, 84 percent responded that they preferred the postponed payment schedule B. This is consistent with the cost/benefit matching of mental budgeting. The benefits of the washer and dryer will be used for a period of years after their purchase.

Paying the cost over a concurrent period matches the cost to the benefit. Note that option B is also consistent with traditional economic theories; that is, people should choose B because it is less expensive after considering the time value of money.

The next two examples are not consistent with traditional economic theories, and respondents did not select the wealth-maximizing option. Consider this example.

Imagine that you are planning to take a one-week vacation to the Caribbean six months from now. The vacation will cost $1,200. You have two options for financing the vacation:
A. Six monthly payments of $200 each during the six months before the vacation.
B. Six monthly payments of $200 each during the six months be- ginning after you return.

Notice that the payment stream options are the same as in the prior question - six payments before or six payments after the purchase. The difference is that the item being purchased has changed. The main difference is that the vacation is a purchase whose benefits will be consumed in a short time, whereas the benefits of the washer and dryer will be consumed over the course of years. Which option would you choose?

Sixty percent of the respondents selected option A, the prepaid vacation. In this case, the payment options do not match with the consumption of the goods. The benefits of vacations are consumed during the vacation, but this vacation must be paid for either before or afterward.

Traditional economic theories predict that people will prefer option B because it is cheaper after considering the time value of money. However, most people choose option A. Why? People believe that a prepaid vacation is more pleasurable than one that must be paid for later because the pain of payment is over. If payment is to be made later, the benefits of the vacation are diminished by wondering how much the pleasure is going to cost. An important factor in the "prepay or finance it" decision is the amount of pleasure expected to be generated by the purchase. The thought of paying for an item over the time that the item is being used reduces the pleasure of using that item. But let's face it: Using a washer and dryer is not that much fun anyway, so we might as well finance it. The dream home example at the beginning of this chapter is another matter. The pleasure of the dream home should not be tainted with debt and the thoughts of future payments; therefore, Mr. and Mrs. J are prepaying (saving for) the house.

The third question to the visitors addressed income from overtime work to be performed: How would you like to get paid for working a few hours on the weekends during the next six months? Prepayment for work to be done in the future was not desirable. Sixty-six of the respondents preferred to get paid after doing the work instead of before. Again, this is not consistent with traditional economic theories. The wealth-maximizing option is to get paid earlier, not later.


2.9.3 Aversion to debt

In the vacation and overtime questions, people are expressing an aversion to debt when the good or service is consumed quickly. People show a preference for matching the length of the payments to the length of time the good or service is used. For example, using debt to purchase homes, cars, TVs, and so forth is popular because these items are consumed over many years. Using debt and paying off the purchase over time results in a strong match associated with the consumption of those items.

On the other hand, people do not like to make payments on a debt for a purchase that has already been consumed. Financing the vacation is undesirable because it causes a long-term cost on a short-term benefit. This is also true for the third question. People do not want to get prepaid for work because it creates a long-term debt (working weekends for the next six months) for a short-term benefit (getting paid). People prefer to do the work first and then get paid.


2.9.4 Sunk-cost effect

Traditional economic theories predict that people will consider the present and future costs and benefits when determining a course of action. Past costs should not be a factor. Contrary to these predictions, people routinely consider historic, nonrecoverable costs when making decisions about the future. This behavior is called the sunk-cost effect. The sunk-cost effect is an escalation of commitment and has been defined as the "greater tendency to continue an endeavor once an investment in money, time, or effect has been made."

Sunk costs have two important dimensions: size and timing. Consider the following two scenarios.

A family has tickets to a basketball game, which they have been anticipating for some time. The tickets are worth $40. On the day of the game, a big snowstorm hits their area. Although they can still go to the game, the snowstorm will cause a hassle that will reduce the pleasure of watching the game. Is the family more likely to go to the game if they purchased the tickets for $40 or if the tickets were given to them for free?

The common belief is that the family is more likely to go to the game if they purchased the tickets. Note that the $40 cost of the ticket does not factor into the hassle of the snowstorm or the pleasure derived from the game. Yet people consider the sunk cost in their decision whether to go. A family that pays for the tickets opens a mental account. If they do not attend the game, the family is forced to close the mental account without the benefit of the purchase, resulting in a perceived loss. The family wishes to avoid the emotional pain of the loss; therefore, they are more likely to go to the game. Had the tickets been free, the account could be closed without a benefit or a cost.

This example illustrates that the size of the sunk cost is an important factor in decision making. In both cases the family had tickets, but it was the cost of the tickets ($40 versus $0) that mattered. The next example illustrates that the timing of the sunk cost is also an important component.

A family has long anticipated going to the basketball game, which will take place next week. On the day of the game, a snowstorm occurs. Is the family more likely to go to the game if they purchased the $40 tickets one year ago or yesterday?

In both cases, the $40 purchase price is a sunk cost. However, does the timing of the sunk cost matter? Yes, the family is more likely to go to the game if they purchased the tickets yesterday than if they purchased the tickets last year. The pain of closing a mental account without a benefit decreases with time. In short, the negative impact of a sunk cost depreciates over time.


2.9.5 Economic impact

The previous examples demonstrate that people are willing to incur monetary costs to facilitate their mental budgeting process. Remember that people tend to prepay for some purchases, and they prefer to get paid after doing the work. By accelerating payments and delaying income, they are not taking advantage of the time value of money principles. Traditional economic theories predict that people would prefer the opposite: delaying payment and accelerating income to maximize the present value of their wealth.

Mental accounting causes people to want to match the emotional costs and benefits of a purchase. Their determination frequently leads to expensive decisions. Consider the following example.

Fifty-six MBA students were asked to select a loan to finance the $7,000 cost of a home-remodeling project. The project involved redecorating (new carpet, wallpaper, paint, and so on) and would last four years, at which point they would have to redecorate again. Two borrowing options were given. One loan had a three-year term and an interest rate of 12 percent. The other was a 15-year loan with an 11 percent interest rate. Both loans could be prepaid without penalty.

Note that the long-term loan has a lower interest rate. In addition, the 15-year loan can be converted into a three-year loan (that has a lower interest rate) by merely accelerating the payments. That is, you could calculate the monthly payment needed to pay off the 15-year loan in only three years. Because the interest rate on the 15-year loan is lower than on the three-year loan, the monthly payments would be lower. When asked, 74 percent of the MBA students preferred the three-year loan. These students indicated a willingness to incur monetary costs (in the form of a higher interest rate) to make it easier to integrate related costs and benefits. The students were willing to pay a higher interest rate in order to guarantee - that the loan will be paid in only three years. This is an example of the self-control problem.


2.9.6 Mental accounting and investing

Decision makers tend to place each investment into a separate mental account. Each investment is treated separately, and interactions are over-looked. This mental process can adversely affect an investor's wealth in several ways. First, mental accounting exacerbates the disposition effect. Recall that investors avoid selling stocks with losses because they do not want to experience the emotional pain of regret. Selling the losing stock closes the mental account, triggering regret.

Consider the wealth-maximizing strategy of conducting a tax swap. A tax swap is when an investor sells a stock with losses and purchases a similar stock. For example, suppose you own Northwest Airlines stock, which has experienced a price decline along with the entire airline industry. You could sell the Northwest stock and purchase United Airlines stock. This tax swap allows you to capture the capital loss of Northwest stock to reduce your taxes while staying invested and waiting for the airline industry rebound.

Why isn't the tax swap strategy used more often? Investors tend to consider the selling of the loser stock as a closing of that mental account and the buying of the similar stock as an opening of a new mental account. This causes two outcomes that affect investors. First, the interaction between these two accounts increases the investor's wealth. Second, the closing of the loser account causes regret. Investors tend to ignore the interaction between accounts; therefore, investors act to avoid regret instead of to maximize wealth.

Mental budgeting compounds the aversion to selling losers. Consider how people value the timing of payments and benefits. As time passes, the purchase of the stock becomes a sunk cost. The emotional pain of wasting some of the sunk cost on a loser diminishes over time. It may be less emotionally distressing for the investor to sell the losing stock later as opposed to earlier.

When investors do decide to sell a loser, they have a tendency to bundle more than one sale on the same day. Investors integrate the sale of losers to aggregate the losses and limit the feeling of regret to one time period. In other words, people may combine the separate mental accounts in losing positions and close them out all at once in order to minimize their regret. Alternatively, investors like to separate the sale of winners over several days to prolong the more favorable feeling. Sonya Lim studied the selling behavior of 50,000 brokerage accounts (425,000 sell trades) from 1991 to 1996. She found that investors are likely to sell more than one losing stock on the same day. On the other hand, if a winner stock is sold, selling another winner stock on the same day is less likely. She concludes, "Investors can maximize their happiness by savoring gains one by one, while minimizing the pain by thinking about the overall loss rather than individual losses." Can the sale with loss be integrated with the sale with a gain at the same time to mitigate the regret? It depends on the relative magnitudes of the loss and gain. Remember that prospect theory says the pain of a loss is greater than the happiness of a gain of the same magnitude. So, if the magnitude of the loss is larger than the magnitude of the gain, the investors will segregate them by selling on different days. If the magnitude of the loss is smaller than the gain, then the investor may integrate them by selling on the same day.

The narrow framing aspect of mental accounting might also explain why so many people do not invest in the stock market, even though stocks have a high mean return. The stock market risk has nearly zero correlation with a person's other economic risk, namely, labor income risk and housing price risk. Therefore, adding even a small amount of stock market risk provides diversification of one's overall economic risk. However, in isolation, which is how people tend to view things, the stock market appears much riskier than labor income risk and housing price risk.

As an example, consider the distribution of asset allocation within U.S. 401(k) retirement plans. A study of nearly 7,000 accounts from one large firm found the allocations to be strongly bimodal. About 48 percent of the participants do not allocate any money to equities. Another 22 percent allocate all of their money to equities. In all, 70 percent of the accounts were completely undiversified among asset classes. These allocations seem more consistent with mental accounting than with decision making from a portfolio perspective.

Mental accounting also affects investors' perceptions of portfolio risks. The tendency to overlook the interaction between investments causes investors to misperceive the risk of adding a security to an existing portfolio. Mental accounting leads to the building of portfolios layer by layer. Each layer represents the investment choices that satisfy various mental accounts. This process allows investors to meet the goals of each mental account separately. It does not lead to the benefits of diversification shown by portfolio theory. In fact, people usually don't think in terms of portfolio risk. Consider the financial adviser advising a client that they should take a little more investment risk to acquire more money for retirement. If asked, "Would you prefer to take a lot more risk with some of your money, or would you prefer to take a little more risk with all of your money?" people tend to think in terms of the first choice, which is consistent with mental accounting. The second choice is from the perspective of modern portfolio theory.


Behavioral financea käsittelevä kirjoitussarja päättyy tähän. Toivon sarjan antaneen lukijoille paremman kuvan siitä mitä behavioral finance on ja miten se vaikuttaa sijoittajien käyttäytymiseen. Sijiottajat eivät läheskään aina toimi kuten akateemiset teoriat antaisivat olettaa. Behavioral finance antaa hyvät selitykset miksi näin tapahtuu. Kun tiedostaa omat heikkoudet on niitä vastaan suojautuminen helpompaa.

(Kuva: cc scragz)

Tämä on kolmas osa käyttäytymisperusteisen rahoituksen eli behavioral financen kirjoitussarjasta. Sen on kirjoittanut Oulun yliopiston rahoituksen professori Hannu Kahra ja teksti perustuu pitkälle John Nofsingerin kirjaan Psychology of Investing. Lue myös sarjan ensimmäinen ja toinen osa. Tämän jälkeen tuleva neljäs osa on sarjan viimeinen.

2.6.6 Anchoring

Kahneman and Tversky (1974) argue that when forming estimates, people often start with some initial, possibly arbitrary value, and then adjust away from it. Experimental evidence shows that the adjustment is often insufficient. Put differently, people "anchor" too much on the initial value. In one experiment, subjects were asked to estimate the percentage of United Nations' countries that are African. More specifically, before giving a percentage, they were asked whether their guess was higher or lower than a randomly generated number between 0 and 100. Their subsequent estimates were significantly affected by the initial random number. Those who were asked to compare their estimate to 10, subsequently estimated 25%, while those who compared to 60, estimated 45%.

2.6.7 Availability biases

When judging the probability of an event the likelihood of getting mugged in Chicago, say people often search their memories for relevant information. While this is a perfectly sensible procedure, it can produce biased estimates because not all memories are equally retrievable or "available", in the language of Kahneman and Tversky (1974). More recent events and more salient events - the mugging of a close friend, say - will weigh more heavily and distort the estimate.


2.6.8 Illusion of control

Another important psychological factor is the illusion of control. People often believe they have influence over the outcome of uncontrollable events. The key attributes that foster the illusion of control are choice, outcome sequence, task familiarity, information, and active involvement. Online investors can routinely experience these attributes.

Choice
Making an active choice induces control. For example, people who choose their own lottery numbers believe they have a better chance of winning than people who have numbers given to them at random. Because online brokers do not give investors advice, investors must make their own choices regarding what (and when) to buy and sell.

Outcome sequence

The way in which an outcome occurs affects the illusion of control. Early positive outcomes give the person a greater illusion of control than early negative outcomes do. Investors were getting on the Web during the late 1990s and taking control of their investments, and because this period was an extended bull market interval, they likely experienced many positive outcomes.

Task familiarity

The more familiar people are with a task, the more they feel in control of the task. For example, investors have been becoming familiar with the online investment environment and have been active traders and participants in Web information services.

Information

When a greater amount of information is obtained, the illusion of control is greater as well. The vast amount of information on the Internet already has been illustrated.

Active involvement

When a person participates a great deal in a task, the feeling of being in control is also proportionately greater. Online investors have high participation rates in the investment process. Investors using discount brokers (such as online brokers) must conduct their own investment decision-making process. These investors obtain and evaluate information, make trading decisions, and place the trades.

The Internet fosters further active involvement by providing the medium for investment chat rooms, message boards, and newsgroups. Internet investment services firms such as Yahoo!, Motley Fool, Silicon Investor, and The Raging Bull sponsor message boards on their Web sites where investors can communicate with each other. Typically, message boards are available for each stock listed on the exchange. Users post a message about the firm using an alias or simply read the message postings.

2.6.9 Past success

Overconfidence is learned through past success. If a decision turns out to be good, it is attributed to skill and ability. If a decision turns out to be bad, then it is attributed to bad luck. The more successes people experience, the more they will attribute it to their own ability, even when much luck is involved.

During bull markets, individual investors will attribute too much of their success to their own abilities, which makes them overconfident. As a consequence, overconfident behaviors (e.g. high levels of trading and risk taking) will be more pronounced in bull markets than in bear markets.

This is borne out in the behavior of investors during the bull market of the late 1990s and the subsequent bear market. As the bull market raged on, individual investors traded more than ever. In addition, investors allocated higher proportions of their assets to stocks, invested in riskier companies, and even leveraged their positions by using more margin (borrowed money). These behaviors slowly became reversed as the overconfidence of the bull market faded and the bear market dragged on.

2.6.10 Conclusions

Economists are sometimes wary of this body of experimental evidence because they believe (i) that people, through repetition, will learn their way out of biases; (ii) that experts in a field, such as traders in an investment bank, will make fewer errors; and (iii) that with more powerful incentives, the effects will disappear. While all these factors can attenuate biases to some extent, there is little evidence that they wipe them out altogether. The effect of learning is often muted by errors of application: when the bias is explained, people often understand it, but then immediately proceed to violate it again in specific applications. Expertise, too, is often a hindrance rather than a help: experts, armed with their sophisticated models, have been found to exhibit more overconfidence than laymen, particularly when they receive only limited feedback about their predictions. Finally, in a review of dozens of studies on the topic, Camerer and Hogarth (1999, p. 7) conclude that while incentives can sometimes reduce the biases people display, "no replicated study has made rationality violations disappear purely by raising incentives".

2.7 Pride and regret

People avoid actions that create regret and seek actions that cause pride. Regret is the emotional pain that comes with realizing that a previous decision turned out to be a bad one. Pride is the emotional joy of realizing that a decision turned out well. Consider this state lottery example. You have been selecting the same lottery ticket numbers every week for months. Not surprisingly, you have not won. A friend suggests a different set of numbers. Do you change numbers? Clearly, the likelihood of the old set of numbers winning is the same as the likelihood of the new set of numbers winning. This example has two possible sources of regret. Regret will result if you stick with the old numbers and the new numbers win. This is called the regret of omission (not taking an action). Regret also will result if you switch to the new numbers and the old numbers win. The regret of an action you took is the regret of commission. In which case would the pain of regret be stronger? The stronger regret would most likely result from switching to the new numbers because you have a lot of emotional capital in the old numbers - after all, you have been selecting them for months. A regret of commission generally is more painful than a regret of omission. Investors often regret the actions they take, but rarely regret the ones they do not.

2.7.1 Disposition effect

Avoiding regret and seeking pride affects people's behavior, but how does it affect investment decisions? Two financial economists, Hersh Shefrin and Meir Statman, adapted this psychological behavior to the investor. They show that fearing regret and seeking pride causes investors to be predisposed to selling winners too early and riding losers too long. They call this the disposition effect. Consider the situation in which you wish to invest in a particular stock. However, you have no cash and must sell a position in another stock hi order to have the cash for the new purchase. You can sell either of two stocks you hold. Stock A has earned a 20 percent return since you purchased it, whereas stock B has lost 20 percent. Which stock do you sell? Selling stock A validates your good decision to purchase it in the first place. It would make you feel proud to lock in your profit. Selling stock B at a loss means realizing that your decision to purchase it was bad. You would feel the pain of regret. The disposition effect predicts that you will sell the winner, stock A. Selling stock A triggers the feeling of pride and allows you to avoid regret.

2.7.2 Selling winners too soon and holding losers too long

The disposition effect not only predicts the selling of winners but also suggests that the winners are sold too soon and the losers are held too long. What does selling too soon or holding too long imply for investors? Selling winners too soon suggests that those stocks will continue to perform well after they are sold. Holding losers too long suggests that those stocks with price declines will continue to perform poorly.

When an investor sold a winning stock, Odean found that the stock generally beat the market during the next year by an average 2.35 per cent. During this same year, the loser stocks that the investors kept generally underperformed the market by -1.06 percent. Investors tend to sell the stock that ends up providing a high return and keep the stock that provides a low return.

2.7.3 Disposition effect and news

One study investigated all the trades of individual investors in 144 NYSE firms during the November 1990 through January 1991 period. Specifically, how investors react to news about the company and news about the economy was studied. News about a company primarily affects the price of the company's stock, whereas economic news affects all firms. Good news about a firm that increases the stock price induces investors to sell (selling winners). Bad news about a firm does not induce investors to sell (holding losers). This is consistent with avoiding regret and seeking pride.

However, news about the economy does not induce investor trading. Although good economic news increases stock prices and bad economic news lowers stock prices, this does not cause individual investors to sell. In fact, investors are less likely than usual to sell winners after good economic news. These results are not consistent with the disposition effect.

2.8 Risk perceptions

Consider this wager on a coin toss: Heads you win $20, tails you lose $20. Would you take this gamble? Assume, you won $100 earlier. Now would you take this gamble? Did your answer change after finding out that you had won earlier? What if you had lost $20 earlier? Would this make the gamble look any different to you?

Many people will take the gamble in one situation but not in another. The odds of winning the $20 do not change in the different scenarios, so the expected value of the gamble remains the same. Neither the risk nor the reward of the gamble changes between situations; therefore, people's reaction to risk must change. People's perception of risk appears to vary. One important factor in evaluating a current risky decision is a past outcome. In short, people are willing to take more risk after earning gains and less risk after losses. To illustrate this behavior, Richard Thaler and Eric Johnson asked 95 undergraduate economics students to take a series of two-step gambles using real money. In the first step, money was either given to or taken from the student. In the second step, the student was asked whether he or she wished to take the gamble presented. Their findings suggest a "house-money effect," a risk-aversion (or snakebite) effect, and a "trying-to-break-even effect," which are discussed next.

2.8.1 Snakebite (or risk aversion)

After experiencing a financial loss, people become less willing to take a risk. When faced with a gamble after already losing money, people generally choose to decline the gamble. Students who initially lost $7.50 were then asked to wager $2.25 on the flip of a coin. This time, the majority (60 percent) declined the gamble. After losing the initial money, the students might have felt "snakebit."

Snakes don't often bite people, but when it happens, the person becomes more cautious. Likewise, after having been unlucky enough to lose money, people often feel they will continue to be unlucky; therefore, they avoid risk.

2.8.2 Trying to break even

Losers don't always avoid risk. People often jump at the chance to make up their losses. After having lost some money, a majority of the students accepted a "double-or-nothing" toss of the coin. In fact, a majority of the students were willing to accept a double-or-nothing toss of the coin even when they were told the coin was not "fair"; that is, students were willing to take a risk even though they knew they had less than a 50 percent chance of winning. The need for breaking even appears to be stronger than the snakebite effect.

Another example of this break-even effect can be seen at the race-track. After a day of betting on the horses and losing money, gamblers are more likely to bet on the long shots. Odds of 15 to 1 mean that a $2 bet would win $30 if the horse wins. Of course, horses with odds of 15 to 1 are unlikely to win. The proportion of money bet on long shots is greater toward the end of the race day than at the beginning. It appears that gamblers are less likely to take this risk early in the day. However, those gamblers who have won money (house- money effect) or lost money (break-even effect) during the day are more likely to take this kind of risk. Winners take this risk because they feel as though they are playing with the house's money. Losers like the opportunity to break even without risking too much more. People without significant gains or losses prefer not to take the risk.

2.8.3 Summary

Everyone has heard the investment advice "buy low, sell high." Why is this so hard to do in practice? One reason is that the house-money effect causes investors to seek riskier investments. This often manifests as the buying of stocks that have already had substantial increases in price. These stocks are risky because expectations have been elevated too much. In short, you buy high. If stock prices decline, you feel snakebit and you want out, so you sell low. The combination of the house-money and snakebite effects causes you to do the opposite of buying low and selling high.

When many investors are affected by these problems, the entire market can be affected. The psychological bias of seeking (or ignoring) risk because of the house-money effect contributes to the creation of a price bubble. The psychological bias of avoiding risk in the snakebite effect leads to stock prices that are driven too low after the bubble collapses. Also, the human memory is more a recording of emotions and feelings of events than a recording of facts. This can cause investors to remember actual events inaccurately or even to ignore information that causes bad feelings.