Affect Heuristic and Investing

Spotted in the Financial Times on Friday, in an article about Northern Rock [Martin Arnold, ‘Northern Rock investors accuse Treasury of profiting from bailout’, Friday, September 4, 2017]:

Many small shareholders lost their life savings when  Northern Rock was nationalised. Pradeep Chand, a 70-year-old former finance director who advises the shareholder association, switched all of his self-invested personal pension into Northern Rock shares in 2005 “in the belief this was a safe, profitable, provincial UK bank.”

“I had kept buying more as the share price declined hoping to average down and in the belief that once [the Bank of England] loans had been agreed the value would slowly recover over three years,” said Mr Chand, who retired 12 years ago because of heart problems. He lost more than £415,000 on Northern Rock shares and now lives with his son and is dependent on his children to support him.

The affect heuristic has struck before, and now it has struck again.


About Stebbing Heuer

A person interested in exploring human perception, reasoning, judgement and deciding, and in promoting clear, effective thinking and the making of good decisions.
This entry was posted in Epistemic Rationality, Problems with perception intuition and judgement and tagged , , . Bookmark the permalink.

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