Later on I will surely write more about behavioral finance since I find that area to be very important and extremely interesting. This video by UCBerkeleyHaas was just published and I thought I´ll share it with you as well. How fear can affect people's behavior with their stocks. Does fear affect your decision making? If you really want to know more about how fear affects people's decision making then you should read their paper about the subject to better understand it. This video just summarizes their work and findings.

Like I said I find behavioral finance to be very interesting and important. I´ll be reading books of the area for a long time into the future and videos are always great help to speed up the learning process. I´m sure the paper behind the video will be much more explanatory as here he just tells the basics. It is still enough to raise your interest and wonder how fear actually affect everything that happens around us.

How Fear Impacts Stock Market Decisions

                                      

"Watching a horror movie can scare you into selling your stocks earlier than you would have otherwise. That's the frightening evidence shown in a series of studies by Associate Professor Eduardo and Chan Jean Lee, a PhD candidate, both in the Haas Marketing Group. Lee and Andrade are the co-authors of "Fear, Social Projection, and Financial Decision Making," forthcoming in a special issue on consumers' financial decision making in the Journal of Marketing Research, November 2011.

The article explains that the scared investor's early decision to sell stocks happens through "social projection"—people's tendency to heavily rely on their own current feelings and inclinations when they estimate others' state of mind and preferences. As a result of social projection, an investor who is scared assumes that other investors are also scared and that their fear will consequently drive the stock price down, prompting the one investor to sell early before the price sinks."