Author: shyam

Some of the academic research we follow here at StockViz show how bizarre human decision making is. Consider this fine example (pdf):

• Investors get excited by the pre-announcement of the interview and ramp shares higher: from days -2 to 0 (interview day) firms experience a positive 4-factor abnormal return of 1.62%
• Then experience a negative abnormal return of -1.08% over the next ten days.
• There is abnormal amount of trading by individual investors on days the CEO is interviewed by CNBC.
• They keep on buying if the interview was both carried out by attractive anchorwoman and was watched by more male viewers.

It seems that we use a different head to trade when we see attractive women…

Related articles

• Do Attractive People Land More Job Interviews? New Study Says Yes
• The cheerleader effect: Pose with a group, look more attractive, say scientists

… but insider information is.

Recent research (pdf) found that averagely informed traders perform worse than the non informed and only traders with high levels of information (insiders) are able to beat the market.

The conclusion: The results suggest that only those traders with near perfect information can beat the market. Of course, attaining perfect information in real-world markets is equivalent to attaining insider information that is generally unavailable to the marketplace.

In the immortal words of Gordon Gekko: You stop sending me information, and you start getting me some.

Related:

The illusion of knowledge
The value of publicly available information is zero
Information Overload