By
Mercy Tukiya Mutanya
March 17th, 2022
The MIT researcher noted that many investors in the dataset they used for examination did not provide their specific gender information.
“Panic selling” is a popular term that refers to investors selling their investments when there is a sharp decline in prices. When investors panic-sell, they sell their assets out of fear of losing all during declines. Unfortunately, most panic sellers do not know when to go back to investment. Hence, they miss out on gains when the market rebounds.
MIT Researchers on Panic Sellers
Researchers from the Massachusetts Institutes of Technology (MIT) have researched a novel large dataset of brokerage account information between 2003 and 2015. The purpose of the research was to identity panic selling and “freakout” behavior on these accounts.
The MIT researchers released a 40-page paper on the 9th of August to show their research findings. Analyzing the investors by their demographic rules, the study revealed that “…investors who are males, or above the age 45, or married, or with a greater number of dependent, or who have declared themselves having excellent investment experience or knowledge tend to freak out in higher proportions.”
According to the research, investors between ages 45 and 100 have a high tendency of panic selling during market crashes. On the other hand, a large percentage of younger investors are not likely to panic sell. Also, married or divorced investors are more like to panic sell than any other demographic group.
The MIT researcher noted that many investors in the dataset they used for examination did not provide their specific gender information. However, data based on those that stated their genders showed that males engage in panic selling than females. Male investors are up to 56.2% of the investors that indicated their genders.
Panic Selling Among Investors with Dependents
Furthermore, there seems to be a connection between panic investors and their number of dependents. Out of the samples of people with dependent information, investors with no dependents show the least reaction to panic selling.
In addition, the research further showed that panic selling is more rampant among investors who self-declared good or excellent investing experience. Investors who declared to lack investment experience tend to hold onto their assets during market crashes. Also, the research showed increased panic selling among investors who self-described their investment knowledge as good or excellent.
Additionally, the occupations group with the highest risks of panic selling are “self employed”, “owners,” and “real estate.”
The three occupational groups less likely to panic sell are “paralegal,” “minor,” and social worker.”
“Panic sales are rare events In all, we obtain 25,418,786 data points, of which only 33,226, or 0.131%, are panic sales (The number of panic sales is less than the number reported in the previous section because we wish to create a lagged series, which forces us to drop some data points),” the paper noted.
