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Selling Fast and Buying Slow
Report

Selling Fast and Buying Slow

Heuristics and Trading Performance of Institutional Investors

Klakow Akepanidtaworn, Rick Di Mascio, Alex Imas and Lawrence Schmidt
SSRN, 2018
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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • For Experts

Recommendation

Economists Klakow Akepanidtaworn, Rick Di Mascio, Alex Imas and Lawrence Schmidt provide new and thought-provoking insights into the performance of institutional portfolio managers. This technical analysis should be of particular value to pension fund trustees and financial professionals, as it highlights a consistent pattern of errors investment managers make by using rule-of-thumb strategies for securities sales. Interestingly, these blunders don’t seem to occur in buy decisions, when managers rely less on heuristics.

Take-Aways

  • Portfolio managers (PMs) who excel at buying assets often make inefficient selling decisions, leading to poor overall performance.
  • PMs underperform against not only a benchmark but also versus a hypothetical process in which the manager sells positions purely at random. 
  • Buying decisions tend to be “more forward-looking and belief-driven,” while selling decisions are “backward-looking” and spurred by the need to raise capital to buy new assets.

About the Authors

Klakow Akepanidtaworn, Alex Imas and Lawrence Schmidt are academics at the University of Chicago, Carnegie Mellon University and MIT, respectively. Rick Di Mascio is CEO of Inalytics Ltd., an investment analysis firm.

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