Sunday, October 12, 2008

Hanging Tough

Joshua Zumbrun, writing in Forbes, on the wisdom of hanging tough. An excerpt:

Stefan Nagel, an assistant professor of finance at Stanford recently co-wrote a paper on this very topic titled "Inexperienced Investors and Bubbles." Harvard's Robin Greenwood and Nagel found that inexperienced investors, in terms of age, are particularly likely to focus too heavily on recent returns.

After the lousy returns of the 1970s, inexperienced investors were more reluctant to invest in stocks. They missed out when stocks returned. After the boom years of the '90s, inexperienced investors were more likely to increase their stock exposure. When the dot-com bubble burst, they got burned.

[HT: Real Clear Politics ]

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