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The Influencial Investor

I just read a great article on the role of the massive fall in investor confidence on the current economic crisis. The article discusses the ways in which the quantitative models for risk developed by financial engineers failed to account for the liquidity risk generated by widespread investor panic following the initial bail out in October of 2008.

Financial contagion has often been discussed in relation to investment in emerging nations; countries increase their willingness to invest when they see other nations doing so and withdraw funding based on the actions of other nations. However, it is quickly becoming clear that similar behavior can occur on a more micro-sphere as investors use their peers as benchmarks in making decisions about where to focus their investment.

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Posted in Business, Investing, Psychology. Tagged with , , , .

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