Posts filed under “Psychology”

How Crises Impact Markets

Our friends at Stock Trader’s Almanac sent along this table, noting how past terror events have generated different market reactions.

STA: "When the market was in decline or weak, the terror attack merely seemed to accelerate the process. But with the Bali bombing, after the 2002 bottom, the market shrugged off the horrific event and never lost ground."


How Crises Impact Markets (Based on Dow Industrials)

Date Crisis 1-Day Change 1-Month Change Subseq. Low Change Days to Bottom Days to Recover 1-Year Change
12/7/41 Pearl Harbor Attack -3.5% -3.0% -8.8% 16 335 12.0%
Final Low -20.2%
6/25/50 N Korea Invades S Korea -4.7% -7.8% -12.0% 18 81 28.8%
10/15/62 Cuban Missile Crisis -0.1% 6.7% -5.4% 8 16 33.8%
11/22/63 Pres Kennedy Shot -2.9% 3.5% -2.9% 1 4 25.0% 
10/19/73 Arab Oil Embargo -0.3% -10.5% -18.2% 47 4 -25.5%
Final Low -40.1%
8/2/90  Iraq Invades Kuwait -1.2% -9.9% -18.4% 70 193 26.2%
9/11/01 Terrorists Attack USA -7.1% -3.8% -14.3% 10 59 -3.0%
Final Low -24.1%
10/12/02 Terrorists Attack Bali 0.3% 6.5% N/A N/A 1 32.9%
3/11/04 Terrorists Attack Madrid -1.6% 2.1% -1.9% 4 6 6.4%
Averages -2.3% -1.8% -15.1% 93 206 21.3%
7/7/05 Terrorists Attack London 0.3% ? ? ? ? ?

 

Thanks for the chart, Jeff.

Category: Markets, Psychology

How Markets React and Recover

Category: Markets, Psychology

The Megabubble Poll

Category: Commodities, Economy, Markets, Psychology, Real Estate

More on Post-Terror Market Responses

Category: Markets, Psychology

Understand the “Clinical Objectivity”

Category: Psychology, War/Defense

Post-Terror Market Responses

Category: Investing, Markets, Psychology, War/Defense

Terror Attack in London

Category: Investing, Psychology

The Psychology Behind Common Investor Mistakes

From R. Douglas Van Eaton, CFA, professor of finance in the
College of Business Administration at the University of North Texas, discusses common investor errors:

Overconfidence

Fear of regret/pain of regret

Cognitive dissonance

Anchoring

Representativeness

Myopic risk aversion

Van Eaton notes" A better understanding of the psychology of investor mistakes can
reduce their effects on investment decisions. Here is a list of the
most common psychological effects, and how you can reduce their impact
and incorporate them into your own investment decisions."

The full piece is below.

>

Source:
The Psychology Behind Common Investor Mistakes
R. Douglas Van Eaton
AAII Journal
http://www.aaii.com/promo/evergreen/basics/jrnl200004p02.cfm

Read More

Category: Psychology

Apprenticed Investor: Tracking Elephants, Part II

Category: Investing, Podcast, Psychology, Technical Analysis

Stop Blaming Oil!

Category: Commodities, Investing, Markets, Psychology