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Meir Statman: Wall Street Journal
Friday, Feb. 11, 2011
Meir Statman, Glenn Klimek Professor of Finance at the Leavey School of Business, was recently quoted in two articles. The Wall Street Journal quoted him in its article “Will Small Investors Ever Warm Up to Stocks Again?”, and The Oregonian quoted him in its article “How we and Archie Bunker err in thinking about losses.”
The article in The Wall Street Journal reveals that there is some concern that the stock market is overheating, as retail investors are putting a lot of money into the market. It also discusses the fact that small investors are wary to jump right back into the stock market, and are instead hesitantly easing their way back in, ready to disappoint those who are expecting these investors to give more. Meir Statman weighs in on the issue saying, “When is the last time you heard somebody say ‘Any dip in the stock market is a buying opportunity’?”
The Oregonian’s article uses an example from the TV sitcom All in the Family to illustrate one human trait that Statman discusses in his book What Investors Really Want. Many investors, particularly homeowners, are reluctant to sell assets that have declined in value, even if they have increased in value during the time the owner has had them. Statman says people fall into this trap because of errors they make in outlining gains and losses.
The article’s author uses Archie Bunker and his son-in-law “Meathead” to demonstrate this idea, and later quotes Statman on the topic. “Homeowners say the market is slow, we’ll just hold on and wait. In truth, it is the homeowners who are slow. They are slow to reconcile themselves to the fact that today’s reasonable prices are lower than the prices they have set in their minds,” argues Statman.