Sep 28, 2021 08:00:00

What is the tendency of people who are easy to panic because of the market crash?

Panic selling is a term that refers to the rush to sell stocks that you have in a psychological panic when the stock market etc. plunges due to some kind of news. It is generally said that panic selling is not a good behavior, and the research team at the Massachusetts Institute of Technology Sloan Management School asked, 'What kind of people are likely to panic selling?' And 'Panic selling is a merit. I reported the result of the investigation on the point such as 'Is it possible to bring about?'

When Do Investors Freak Out ?: Machine Learning Predictions of Panic Selling by Daniel Elkind, Kathryn Kaminski, Andrew W. Lo, Kien Wei Siah, Chi Heem Wong :: SSRN
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3898940

Don't Panic Over Panic Selling: MIT Researchers | ThinkAdvisor
https://www.thinkadvisor.com/2021/09/21/dont-panic-over-panic-selling-mit-researchers/

Did you panic sell during the latest market dip? When to get back in
https://www.cnbc.com/2021/09/25/did-you-panic-sell-during-the-latest-stock-market-dip-heres-when-to-get-back-in.html

The research team investigated the 'frequency, timing, and duration of panic selling' using a 2003-2015 dataset consisting of more than 650,000 personal securities accounts living in approximately 300,000 households. Panic selling in this study is defined as 'a 90% decrease in equity assets over a month, of which more than 50% is due to trading.'

Analysis of the data confirmed that an average of 0.1% of all investors were panicking for some reason at any given time, but again the tendency to panic when the market plunges increases.

Also, those who are most likely to sell panic are men over the age of 45 who are married or divorced and believe that they have good investment experience or knowledge and have dependents. It turns out that it is. It seems that these people are often working in the self-employed or real estate industry, and the occupations that do not sell the most panic are paralegals that assist the work of lawyers and social workers who support people with problems in social life. It was said that.

Machine learning researcher Chi Heem Wong, who co-authored the paper, used a neural network model to take into account market conditions, investor demographic attributes, financial history, and more, as of about a month ago. He claims he could have predicted whether he would panic.

It's generally said that panic selling is a bad thing, but the research team says it has certain benefits as a 'mechanism to curb losses in a rapidly deteriorating market.' In other words, if you panic and convert your assets into cash in a market plunge, you may be able to prevent further loss of assets.

However, the research team points out that the problem of panic selling is that it becomes difficult to make a profit in the market after the market crashes. In this study, 58% of panic-selling investors resumed investing within six months, while 31% never invested money in risky assets again. Big returns are often obtained after a recession, so if you don't return to the investment world after a panic sale, you'll be left with a loss.

Financial planner Jake Northrup recommends that panic sellers ponder 'why did they panic sell?' When investing again. By analyzing the thoughts and feelings when selling panic, it is necessary to reconsider the risk tolerance for asset loss and, in some cases, change the ratio of asset distribution.

Also, for investors who have once panicked, 'when to reinvest their funds' is anxious. Therefore, financial planner Teresa Bailey said that the 'dollar cost averaging method', which divides funds and purchases financial products at regular intervals, and the

dollar cost averaging method, are used to create many assets when the market is depressed. We recommend a devoted approach. 'The data show that if you continue to invest, your wealth will increase,' Bailey said, arguing that not being fooled by a short-term plunge and adhering to a long-term investment plan will lead to wealth formation.