Net Gains: How Watching Basketball Can Improve Your Approach to Investing
If you want to improve your investing, settle into an armchair, grab the remote -- and spend the next few weeks watching the NCAA basketball tournaments.
True, this might not endear you to your family. But the fact is, there are intriguing parallels between the foibles of basketball and the behavioral mistakes investors make.
As you cruise the channels, what should you look for? Academic and financial experts offer up these three basketball-inspired investment insights.
? Keeping your cool. Both the men's and women's NCAA tournaments begin this week. If you think stock jockeys are obsessed with finding the next hot thing, just listen to the basketball commentators.
You will probably hear the television announcers declare that one or two of the players have the "hot hand" because they have scored on, say, their last three shots. The implication: Their teammates should feed them the ball, because there's a good chance they will keep knocking down the jump shots.
Academics, however, would beg to disagree. A study that appeared in Cognitive Psychology in 1985 looked at the shooting record of the Philadelphia 76ers during the 1980-81 season, a squad that included the great Julius Erving. The study found that, contrary to popular belief, the probability that the players would score on their next shot was, on average, slightly lower following a successful shot.
But what about those unusual hot streaks? Statistically, hitting three or four shots in a row -- or beating the market in consecutive years -- just isn't that unusual. Indeed, if you and a bunch of friends each flipped a coin 20 times, half of you would likely get four heads in a row.
"Fund managers can look like they're hot or like they're a market beater," says Thomas Gilovich, co-author of the "hot hand" study and a psychology professor at Cornell University. "But you swap out of your underperforming fund and into the hot fund at your peril. Given that the market is pretty efficient, past performance just isn't a good guide."
Why do people reach grand conclusions based on skimpy data? Part of the blame lies with so-called confirmation bias. If you are convinced you're a great stock picker or that basketball players can "get hot," you will likely find the necessary proof.
"The brain looks for patterns," says Meir Statman, a finance professor at Santa Clara University in California. "And once you decide there is a pattern, you will look for confirming evidence and you will dismiss contradictory evidence as a fluke."
? Expecting less. While it's hard to say definitively that some fund managers are superior to others, some basketball teams clearly are more skillful. Yet fans of weaker teams are forever hopeful.
How often does a college basketball team that's trailing at halftime come back to win? Allan Roth, a financial planner with Wealth Logic in Colorado Springs, Colo., often puts this question to audiences. He says people typically guess that between 30% and 60% of teams make a comeback.
In fact, Mr. Roth looked at over 3,300 college games played in November, December and January and found that, among teams trailing at the half, less than 20% came back to win. Why do folks think the number is so much higher? Mr. Roth figures there are two reasons.
First, we tend to be overly optimistic. "It's America," Mr. Roth says. "We believe in the underdog -- and we believe in the small investor." Even though studies suggest that most investors lag far behind the market, we like to think we can beat the odds and come out on top -- which helps explain why market-tracking index funds still aren't that popular.
Second, comeback victories tend to get the most media attention, so they stick in our minds. "It's the same thing with hot mutual funds and hot money managers," Mr. Roth says. "Because investors only hear about the winners, they think it's easy to beat the market."
? Playing the odds. Investors hate the idea of losing. So, too, do basketball coaches -- and it can lead both groups to be a little irrational.
Suppose a team is down by two points and it has time for one last shot. What play should the coach call? Let's say there's a 50% chance of scoring on a two-point shot and pushing the game into overtime, but only a 33% chance of making a three-point shot and getting the immediate win.
Nonetheless, the three-point shot is the rational choice. The reason: If the team makes the two-point shot, it still has to play overtime, where its chances of winning are 50%. In other words, by opting for the two-point shot, the team is looking at having to win on two 50% gambles, which means its overall odds of winning are just 25%.
Yet coaches usually go for the two, notes Richard Thaler, an economics professor at the University of Chicago. Chalk it up to our aversion to regret. If the coach goes for the three and misses, not only will the team suffer an immediate stinging loss, but also critics will vilify the coach as "greedy" and "reckless."
Similarly, investors are often too worried about looking foolish in the short term. Stocks, like the three-point shot at the buzzer, may be the best bet. But many investors shy away from stocks, because they worry about stinging short-term losses and the pangs of regret that accompany them.
"If you believe there's a premium to owning stocks, you're crazy not to own them if you're a long-term investor," Prof. Thaler argues. "You shouldn't be so bothered by day-to-day or month-to-month volatility."
看篮球比赛 找投资灵感
缺乏投资灵感时，不如找张舒服的靠背椅，拿起遥控器，看上几周全美大学体育联盟(NCAA)的篮球赛。
当然，你的家人可能要对你产生不满了。不过事实上，篮球赛的失误与投资者的失策有惊人的相似之处。
你拿著遥控器到处搜台时究竟在找什么？金融大师们的夸夸其谈其实与篮球赛的道理有异曲同工之妙。
－－保持冷静。NCAA男子和女子比赛均将于本周拉开帷幕。如果你觉得股票操盘手有些黔驴技穷，找不到投资热点，那么，听听篮球解说员在说什么。
你可能会听到解说员点著一两名球员的名字，高喊“神投手”(hot hand)，“神投手”，因为他们已经连续三投三中。言外之意：他们的队友应该喂球给他，因为他们很有可能继续弹无虚发。
然而学术界的理论却恰好相反。Cognitive Psychology 1985年发表报告对1980-81年间费城76人队的投篮数据进行了分析，当时“J博士”朱利叶斯?欧文(Julius Erving)刚好效力于此。研究显示，与人们的预期恰恰相反，球手们在每次投中后的命中率往往会小幅下滑。
但这些意外的连中又是从何而来？统计数据显示，连中三四次－－或者连续几年强于大盘－－并非那么偶然。事实上，如果你和几个朋友一起抛硬币，有一半的人会出现连续4次头像朝上的结果。
“基金经理们看上去很像“神投手”，好像总会超越大盘，”“神投手”研究的联席作者、康纳尔大学(Cornell University)心理学教授托马斯?季洛维奇(Thomas Gilovich)表示，“但是当你把表现不佳的基金换成热点基金时，你正把自己带到危险的境地。鉴于市场非常高效，过去的表现不能代表未来。”
为什么人们会根据如此寥寥的数据妄下结论呢？这可能要部分归因于所谓的“肯证偏误”(confirmation bias)。如果你发现你的选股不错或者认为某个篮球手可能成为“神投手”，你会不自觉地想办法证明它。
“大脑在寻找一些定式，”加州圣塔克拉克大学(Santa Clara University)金融学教授梅耶?斯塔特曼(Meir Statman)说。“一旦你认定某种定式，你就会不断地想办法证明，同时忽略了相反的例证。”
－－降低预期。虽然很难肯定地说哪些基金经理一定比其他人更高明，但是某些球队技高一筹这却是显而易见。然而，弱队的支持者却总是抱有希望。
大学生篮球赛中半场结束时落后，但之后反败为胜的几率究竟有多少？科罗拉多州Wealth Logic的金融策划师艾伦?罗斯(Allan Roth)经常在演讲会上向场下观众问起这个问题。他说，人们通常会猜，反败为胜的比率在30%至60%之间。
而事实上，从罗斯在11月、12月和1月对3,000场大学生篮球赛的观察来看，半场结束时落后的球队其反超的概率不足20%。为什么人们预计的比例会那么高呢？罗斯总结了两点原因。
首先，我们总是过于乐观。“这就是美国，”罗斯说。“我们相信弱势群体－－我们相信小型投资者。”即便研究显示多数投资者被市场抛在了后面，但我们仍然相信我们会创造奇迹，会迎头赶上－－这也正是很多跟踪市场走势的指数基金不那么受欢迎的原因所在。
其次，后来居上的投资者总是受到媒体的热烈追捧，在我们的脑海中刻下了深深的烙印。“热门共同基金和热门经理也同样，”罗斯说，“因为投资者只关注对胜利者的溢美之词，想当然地认为赶超市场易如反掌。”
－－权衡胜算。投资者害怕失败。篮球教练也一样－－因此他们都会失去理智。
设想一下，一只球队在最后的时候落后两分，他们还有一次投篮机会。教练该怎么部署？让我们假设投中两分球、进入加时赛的概率是50%，而投中三分、立即取胜的概率只有33%。
尽管如此，三分球仍然是明智选择。理由是：即便拿到两分，两队仍要进入加时赛，而加时赛取胜的概率又为50%。换句话说，选择两分球，该队要参加两次50%的较量，最后的胜算概率变成了25%。
然而教练还是会选择两分球，芝加哥大学(University of Chicago)经济学教授理查德?塞勒(Richard Thaler)说。因为我们恐惧遗憾。如果教练选择三分球却没有投进，不仅会立即失去比赛，而且难免背上“贪婪”、“莽撞”的骂名。
同样，投资者也会被短期的得失困扰。股票就像在观众喧嚣中的三分球一样，也许正是最好的赌注。但很多投资者对股票退避三舍，因为他们害怕遭受短期的痛苦、给自己留下遗憾。
如果你还相信投资股票可以给你带来回报，如果你是长线投资者的话，不持有股票就是一种失去理智的做法，塞勒说。“不要被日常的波动扰乱了你的思绪。”
