Alex Imas of Carnegie Mellon University, Lawrence Schmidt of MIT Sloan School of Management, Klakow Akepanidtaworn of University of Chicago Booth School of Business and Rick Di Mascio, CEO and Founder of Inalytics, co-authored the paper Selling fast & buying slow: Heuristics & trading performance of institutional investors. The team studied 783 institutional portfolios from Inalytics’ anonymised database of elite equity portfolio managers.
In summary, the research revealed that individual selling decisions cost managers nearly 100 basis points of performance annually. The paper goes on to uncover why the loss of alpha is so great and even suggests that a randomised selling approach would benefit most institutional investors, who do not historically employ the same rigorous research methodologies when selling their holdings as they do when making a decision to buy.
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