In his recent interview in the All Else Equal Podcast, Cliff Asness explains why FOMO means investors can’t tell you about their losers. Here’s an excerpt from the interview:
Asness: So by the way, this is not different than fear of missing out, FOMO on Facebook. They tell us there’s a epidemic of depressed people because everyone thinks that other people’s lives are better than theirs, because they’re looking at their Facebook or their Instagram and all the fun they’re having.
You don’t hear about people’s problems on Facebook, there are exceptions of course, but as a rule they’re positive folks. You don’t see people at cocktail parties going – Oh, man, I suck at stock-picking. Let me tell you about the.. I made all this money but I lost it all on these. Again there are exceptions. I would listen to that person at the cocktail party, they’d be kind of fun. You know, the honest person who is telling you that but that’s not the rule.
So you do have to be very careful of the financial version of FOMO where you’re… people are picking their winners, even if they’re not lying about them and who speaks up is being cherry-picked.
So, I will call myself a cynic that the individual doing this casually can add a whole lot of value, certainly at the concentrated picking of individual security level. But I made a big concession to my efficient market roots that I think there are some people who clearly can.
You can listen to the entire discussion here. Cliff Asness starts speaking at 11:00 mins:
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