Thursday 19 Jul 2018 | 12:19 | SYDNEY
Thursday 19 Jul 2018 | 12:19 | SYDNEY

Political advice from Wall St


Sam Roggeveen


18 September 2008 09:40

Look, I realise this is hardly the time for Wall St to be offering advice on anything, but bear with me. I'm reading a rather fascinating book about behavioural economics called Nudge (there's a blog about it too), which argues at one point that 'attitudes toward risk depend on the frequency with which investors monitor their portfolios.'

Because people are wired to hate losses more then they love gains, a person who monitors daily the rollercoaster of the stockmarket is going to be very nervous about stocks, because they go down as often as they go up. As a result, they'll be tempted to move their money elsewhere. Long term, of course, stocks are a really good investment, so the person who monitors their stock portfolio less frequently is likely to be better off financially and psychologically.

It's tempting to draw parallels with the way political tragics (like me) monitor the US election campaign. First, we place way too much emphasis on the ability of short-term factors to influence the final outcome. And second, for those who are supporting a particular candidate there's a lesson too — when you hear bad news about your preferred candidate's campaign (ie. a poor opinion poll result), your brain is likely to attach more significance to this piece of information than if you hear good news.