A new study suggests PTSD following the 2008 market crash may have induced money mangers to abandon “buy and hold” strategies.
In “Financial Trauma: Why the Abandonment of Buy-‐and-‐Hold in favour of Tactical Asset Management May be a Symptom of Posttraumatic Stress” published in something called The Journal of Financial Therapy, authors Bradley Klontz and Sonya Britt report 93% of respondents experienced medium or high levels of PTSD symptoms.
The study was first spotted by Marketwatch.
Here’s how the authors define PTSD:
(a) re-‐experiencing a traumatic event through intrusive thoughts or distressing dreams; (b) avoidance of stimuli associated with the traumatic experience, including efforts to avoid thoughts, reminders of the event, feelings of detachment, or symptoms of anxiety, including irritability, concentration problems, or sleep disturbance.
Last year, 63% of money managers said they preferred active to passive portfolio management.
In 2005, just 24% believed this.
The authors say there’s probably a link to the shellshock:
It is possible that the large-‐ scale move away from buy-‐and-‐hold strategies by many financial planners may be a residual symptom of posttraumatic stress. When tactical moves are based on inaccurate predictions, they may ultimately put cli strong emotional financial experiences can lead to rigid, extreme, and often inaccurate beliefs about money (Klontz & Klontz, 2009).
And check out this table showing how worldviews have changed:
Nearly half of all respondents said Lehman had caused them to question how they help people.