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The meerkat effect: Personality and market returns affect investors’ portfolio monitoring behaviour

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  • Gherzi, Svetlana
  • Egan, Daniel
  • Stewart, Neil
  • Haisley, Emily
  • Ayton, Peter
Abstract
Karlsson, Loewenstein and Seppi (2009) found that, following market downswings, investors are less likely to login to monitor their retirement portfolios. They concluded that, rather like (apocryphal) ostriches sticking their heads in the sand, investors avoid unpleasant information by reducing portfolio monitoring in response to news of negative market movement. We apply generalised non-linear mixed effects models to test for this selective information monitoring at an individual level in a new sample of active online investors. We see different behaviour in this new sample. We find that investors increase their portfolio monitoring following both positive and daily negative market returns, behaving more like hyper-vigilant meerkats than head-in-the-sand ostriches. This pattern persists for logins not resulting in trades and weekend logins when markets are closed. Moreover, an investor personality trait – neuroticism – moderates the pattern of portfolio monitoring suggesting that market – driven variation in portfolio monitoring is attributable to psychological factors.

Suggested Citation

  • Gherzi, Svetlana & Egan, Daniel & Stewart, Neil & Haisley, Emily & Ayton, Peter, 2014. "The meerkat effect: Personality and market returns affect investors’ portfolio monitoring behaviour," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 512-526.
    • Handle: RePEc:eee:jeborg:v:107:y:2014:i:pb:p:512-526
    DOI: 10.1016/j.jebo.2014.07.013
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    6. Johannes Maier & Dominik S. Fischer, 2021. "Decomposing the Disposition Effect," CESifo Working Paper Series 9334, CESifo.
    7. Rupali Misra & Sumita Srivastava & D. K. Banwet, 2019. "Are type B investors efficacious? Exploring role of personality in ambidextrous investment decision-making," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(1), pages 27-34, March.
    8. Sifat, Imtiaz Mohammad & Thaker, Hassanudin Mohd Thas, 2020. "Predictive power of web search behavior in five ASEAN stock markets," Research in International Business and Finance, Elsevier, vol. 52(C).
    9. Kuo, Wei-Yu & Zhao, Jing, 2023. "Pre-holiday limit order cancellation of individual and institutional investors," Finance Research Letters, Elsevier, vol. 52(C).
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    11. Pagel, Michaela & Olafsson, Arna, 2017. "The Ostrich in Us: Selective Attention to Financial Accounts, Income, Spending, and Liquidity," CEPR Discussion Papers 12259, C.E.P.R. Discussion Papers.
    12. Baur, Dirk G. & Dimpfl, Thomas, 2016. "Googling gold and mining bad news," Resources Policy, Elsevier, vol. 50(C), pages 306-311.
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    15. Gutsche, Gunnar & Wetzel, Heike & Ziegler, Andreas, 2020. "How relevant are economic preferences and personality traits for individual sustainable investment behavior? A framed field experiment," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224542, Verein für Socialpolitik / German Economic Association.
    16. Lammer, Dominique Marcel & Hanspal, Tobin & Hackethal, Andreas, 2020. "Who are the Bitcoin investors? Evidence from indirect cryptocurrency investments," SAFE Working Paper Series 277, Leibniz Institute for Financial Research SAFE.
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    19. Maier, Johannes K. & Fischer, Dominik S., 2021. "Decomposing the Disposition Effect," Rationality and Competition Discussion Paper Series 288, CRC TRR 190 Rationality and Competition.

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    More about this item

    Keywords

    Behavioural finance; Individual investors; Selective attention; Personality; Investment decisions; Ostrich effect;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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