Joseph Ciolli writes on Bloomberg: “When the going gets rough, the 1 percent start selling. That’s the finding of a new paper that says people with the highest income bailed from stocks disproportionately on the worst days of the financial crisis. The share of selling by the biggest earners rose ‘sharply’ in days following spikes in volatility, according to data on millions of sales reported to the government in 2008 and 2009.” Daniel Reck, a doctoral candidate in the economics department at the University of Michigan and one of the paper’s authors, said: “Very, very high income people are disproportionately likely to sell a bunch of stock during a financial crisis.” One explanation for the divergence is that rich people have more at stake per person and are more sensitive to shocks, though it’s only speculation, Reck said. Another is they believe they’re better market timers. A third possibility is that investors who earn less are reluctant to sell at a loss, a cognitive tendency known as the disposition effect. (bloomberg.com)
The Super Rich Were the First to Bail During the Financial Crisis
