Factors Related to Making Investment Mistakes in a Down Market

Abstract

Using data from the 2008 FPA-Ameriprise Financial Value of Financial Planning Research Study, this study identifies the factors related to making investment mistakes by moving assets into more of a cash position in a down market while having an adequate level of emergency funds. The results show that investors who are male, Asian, wealthier, overconfident, loss-averse, and reported an understanding of financial risks are more likely to make such investment mistakes during a down market. These findings have important implications for investors, their advisors, and financial planning professionals in general.

Keywords: Behavioral bias, down market, investment behavior, recession