Selling Fast and Buying Slow: Heuristic and Trading Performance of Institutional Investors

Date: Wednesday, 20 November 2019

Where: BlackRock, Level 26, 101 Collins St, Melbourne

Time: 12:15pm for 12:30pm start – 1:45pm (networking lunch included)

Cost: $15 members; $25 – Affiliated Group Member (CAIA / AIST / Q-Group); $35 – non-members


For any inquiries, contact

Most research on heuristics and biases in financial decision-making comes from non- experts, such as retail investors who hold modest portfolios. We use a unique data set to show that financial market experts – institutional investors with portfolios averaging $573 million – exhibit costly, systematic biases. A striking finding emerges: while investors display clear skill in buying, their selling decisions underperform substantially – even relative to strategies involving no skill such as random selling. We present evidence for limited attention as the driver of this discrepancy, with investors devoting more attentional resources to buy decisions than sell decisions. A salience heuristic explains much of the underperformance in selling: investors are prone to sell assets with extreme returns across all specifications. This strategy is a mistake, resulting in substantial losses relative to randomly selling assets to raise the same amount of money. In contrast to selling decisions, the salience heuristic does not appear to drive buying decisions, which are not affected by prior returns.

Rick Di Mascio

Rick joined the British Coal Pension Fund in 1979 and eventually held the joint roles of CIO and CEO. At that time the Fund was one of the earliest adopters of a strategy that later became known as LDI.  Rick’s career included spells at Goldman Sachs Asset Management, and an early European Long / Short hedge fund Olympus Capital. Inalytics was established 20 years ago by Rick to provide objective empirical measures of how Fund Managers generate alpha. Inalytics’ Clients include some of the World’s largest and smallest Fund Managers, Sovereign Wealth Funds, and Pension Funds, in some 10 Countries. Rick is a special Advisor to USS the largest Pension Fund in the UK.

More recently Rick has collaborated with Co-Authors from the University of Chicago – Booth School, Carnegie Mellon University, and MIT Sloan School of Management on: Selling Fast and Buying Slow: Heuristic and Trading Performance of Institutional Investors.

Note:  The paper is in the top 1000 downloads in any social science discipline on the entire SSRN site.  A remarkable validation given that the paper was only published less than 6 months ago.

CFA Society Melbourne has determined that this program qualifies for 1 CE credit hour under the guidelines of the CFA Institute Continuing Education Program. If you are a CFA Institute member, use the member app to record your CE credit for your participation in this presentation. This is not done automatically for you.