Can you play the stock market just based on knowledge of human behavior?
It would be an interesting experiment to try. The vast majority of people are going off bad information, irrational hunches and specious theories anyway, so why not?
- Pick stocks with pleasant sounding names. Or companies with awesome Super Bowl commercials. Follow Twitter trends or popular music.
- Is that CEO unmarried? Single guys take more risks in their personal life and with their companies. Does he fly planes or have a huge mortgage? He’ll be taking risks at the office too. You might be able to predict how well a female CEO’s company will do just by looking at her face. And the stock market discriminates against companies that have women on their board: “Companies with male-only boards enjoyed a valuation premium of 37% relative to firms with a woman on their board.”
- How can you pick a good broker? It may be in his DNA but you definitely want someone who trusts his feelings and who is constantly calling, emailing and IM’ing.
- Is it sunny out? Awesome. “…stock trades from 26 exchanges around the world between 1982 and 1997 showed that profits were up 24.8% on unseasonably sunny days compared to cloudy days. Unseasonably sunny weather appears to elicit positive affect, which is then reflected in positive judgments.”
- Buy stocks in December and sell in January because of “the January effect.” Buy on Mondays because Mondays suck. Sell in May because of the “optimism cycle.” And if you live in a Muslim country, returns are nine times higher during Ramadan.
- WSJ stories with photos affect stock prices more than stories without photos.
- Sales of sex toys can be an economic indicator: “Market research in 2009 found that sales of lubricants and sexual-enhancement devices were rocketing in the recession… people need a cheap way to feel good in hard times (either that or they need a way to get hard in hard times).”
- How is that soccer team doing? It could affect your portfolio. Did you country win the bid to host the Winter Olympic Games? Sell.
- Sound crazy? The stock market does seem to suffer from bipolar disorder. What’s something that works and doesn’t sound too ridiculous? You can get rich by insider trading legally. Some research can tell you which execs are insider trading and then it’s just a matter of mimicking their trades.
- And as for your own behavior, never watch porn when you trade stocks. Bad idea.
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Posted On: June 24, 2012