Psychology & Behavior4 分钟阅读

Action Bias (Inability to Sit Still)

Have you ever felt uneasy just watching when the market swings, thinking 'shouldn't I be doing something?' This impatience also has a name.

What Action Bias Is

Action bias is the psychology of irrationally preferring to 'do something' over staying still. Doing nothing somehow feels like sitting on your hands, which makes you anxious.

A famous piece of evidence is the 2007 study of soccer penalty kicks by Bar-Eli's research team. Analyzing 286 penalty kicks, they found that although probabilistically the goalkeeper is best off staying put in the center of the goal, goalkeepers almost always dove to the left or right.

The reason is 'norms.' Since diving is taken for granted, conceding a goal while standing still looks more incompetent and feels more regrettable than conceding while diving. So even when it's statistically disadvantageous, they choose to 'jump anyway.'

Action Bias in Investing

When stock prices surge and plunge, it's very hard to sit still in front of the screen. The pressure that 'if I don't do something now, I'll be the only one left behind' rushes in.

As a result, you buy and sell more often than necessary. When it rises you chase-buy for fear it'll rise further, when it falls you cut losses out of fear, and when it rebounds you buy again to follow. But this frequent trading rarely translates into actual profit. Like the goalkeeper, you only gain the relief of having 'moved,' while the result is more likely to get worse.

The Hidden Cost of Frequent Trading

Money leaks out every time you buy and sell. The trading commission charged on each trade, the securities transaction tax levied on sales in the case of Korean stocks, and the spread — the tiny difference between the buy price and the sell price — accumulate every single time.

These costs look small on any one occasion, but they snowball as the number of trades grows. Add the fact that timing 'buy low and sell high' correctly every time is essentially impossible, and frequent trading generally erodes performance. These costs should not be hidden; factor them in from the start.

Sometimes 'Doing Nothing' Is Best

In long-term investing, doing nothing and simply holding is often the best strategy. While you buy a good asset and hold it for a long time, most of the market's short-term swings are passing noise.

The way to beat action bias is to set 'rules for not reacting' in advance — for example, 'even in a plunge, I don't touch it outside my set contribution schedule.' As the penalty-kick lesson shows, the courage to hold your position is sometimes better than diving.

常见问题

Q. So is it better not to watch the market at all?

If your urge to look every day and react is strong, reducing how often you check helps. For a long-term investor, moment-to-moment prices are mostly noise. But 'indifference' and 'regular review' are different. Checking on a set schedule whether things are going as planned is necessary; the problem is improvised trading every time.

Q. Are stop-losses and rebalancing also action bias?

A stop-loss or rebalancing done according to a predetermined rule is not action bias but planned action. Action bias refers to trades done 'improvisedly out of anxiety.' For the same trade, the key difference is whether the trigger is emotion or a rule.