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Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors

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  • KLAKOW AKEPANIDTAWORN
  • RICK DI MASCIO
  • ALEX IMAS
  • LAWRENCE D.W. SCHMIDT

Abstract

Are market experts prone to heuristics, and do these heuristics transfer across buying and selling domains? We investigate this question using a unique data set of institutional investors with portfolios averaging $573 million. A striking finding emerges: While there is evidence of skill in buying, selling decisions underperform substantially, even relative to random‐selling strategies. This holds despite the similarity between the two decisions in frequency, substance, and consequences for performance. Evidence suggests an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: We document a systematic, costly heuristic process for selling but not for buying.

Suggested Citation

  • Klakow Akepanidtaworn & Rick Di Mascio & Alex Imas & Lawrence D.W. Schmidt, 2023. "Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors," Journal of Finance, American Finance Association, vol. 78(6), pages 3055-3098, December.
    • Handle: RePEc:bla:jfinan:v:78:y:2023:i:6:p:3055-3098
    DOI: 10.1111/jofi.13271
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    Cited by:

    1. Jürgen E. Schatzmann & Bernhard Haslhofer, 2023. "Exploring investor behavior in Bitcoin: a study of the disposition effect," Digital Finance, Springer, vol. 5(3), pages 581-612, December.
    2. Xi (Novia) Chen & Peng‐Chia Chiu & Qin Li & Po‐Hsiang Yu, 2026. "Is Corporate Bond Market (In)attentive to Earnings News on Busy Reporting Days?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 66(1), pages 48-79, March.
    3. Lei, Xiaoyan & Zhou, Yuegang, 2025. "Ownership acceleration and the volume volatility-return link: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    4. Germ'an Reyes, 2022. "Coarse Wage-Setting and Behavioral Firms," Papers 2206.01114, arXiv.org, revised Mar 2024.
    5. Felipe A. Araujo & Christopher F. Chabris & Michelle N. Meyer, 2025. "The Effect of On-the-Job Experience on Base-Rate Neglect: Evidence from Medical Professionals," Management Science, INFORMS, vol. 71(10), pages 8807-8822, October.
    6. Beata Javorcik & Alexander Plekhanov, 2026. "Navigating Industrial Policy," EconPol Forum, CESifo, vol. 27(01), pages 09-13, January.
    7. George Loewenstein & Zachary Wojtowicz, 2023. "The Economics of Attention," CESifo Working Paper Series 10712, CESifo.
    8. Schwartz-Ziv, Miriam & Wermers, Russ, 2022. "Do institutional investors monitor their large-scale vs. small-scale investments differently? Evidence from the say-on-pay vote," Journal of Banking & Finance, Elsevier, vol. 141(C).
    9. Kim, Jinyong & Kim, Yongsik, 2023. "Which stock price component drives the Amihud illiquidity premium?," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    10. Susan K Christoffersen & Donald B Keim & David K Musto & Aleksandra Rzeźnik, 2022. "Passive-Aggressive Trading: The Supply and Demand of Liquidity by Mutual Funds [Does motivation matter when assessing trade performance? An analysis of mutual funds]," Review of Finance, European Finance Association, vol. 26(5), pages 1145-1177.
    11. Onur Kemal Tosun & Liang Jin & Richard Taffler & Arman Eshraghi, 2022. "Fund manager skill: selling matters more!," Review of Quantitative Finance and Accounting, Springer, vol. 59(3), pages 969-994, October.
    12. Felipe Caro & Anna Sáez de Tejada Cuenca, 2023. "Believing in Analytics: Managers’ Adherence to Price Recommendations from a DSS," Manufacturing & Service Operations Management, INFORMS, vol. 25(2), pages 524-542, March.

    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G4 - Financial Economics - - Behavioral Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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