-- Robert Preidt
THURSDAY, Nov. 10 (HealthDay News) -- Watching a scary movie can
frighten you into selling your stocks too soon, a new study
The researchers explained that this is due to something called
"social projection," in which people's own current feelings and
inclinations heavily influence their assessment of others' state of
mind and preferences.
This means that an investor who is scared assumes that other
investors are also scared and that their fears will drive stock
prices lower, prompting the investor to sell early, said study
co-author Eduardo Andrade, an associate professor in the business
school at the University of California, Berkeley.
"If I'm scared, I tend to project that you are scared," he said in a university news release. "If I feel like selling, I project that you are also going to sell, and that pushes me to sell earlier rather than later in anticipation of a drop in stock value."
In this study, the researchers examined whether emotions
completely unrelated to the stock market could influence investor
behavior. They had one group of volunteers watch horror movies
while another group watched documentaries about Benjamin Franklin
and Vincent Van Gogh.
After watching the movies, the volunteers participated in a
stock market simulation experiment. Those who watched the horror
movies were more likely to sell early than those who watched the
documentaries, the investigators found.
But fear triggered early selling only when participants were
told that the value of the stock was affected by other people, not
when they were told the stock value was randomly determined by a
computer, where social projection was not a factor.
The findings suggest that being able to control fear is
beneficial for investors.
"Generally speaking, those who made more money were those who decided to stay longer in the simulation game," Andrade said.
The study is published in the November issue of the
Journal of Marketing Research.
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