Love is not logical - and neither, arguably, are investors who stick with underperforming investments in the belief that their fortunes may reverse against all available evidence, writes John Roe.
Nevertheless, many fund managers appear to hold certain assets even when it would be prudent to walk away, going against their more rational judgement and demonstrating a very human susceptibility to behavioural biases. The impact of behavioural biases can be so strong on investors and their investment decisions that Israel prohibited the display of retirement funds' investment returns for periods shorter than one year; in doing so, they limited the impact of short-term, recent performance on investment decisions. This approach may minimise the impact of a few biases, but drawing less...
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