61 Pages Posted: 2 Jan 2019 Last revised: 28 Sep 2019

Date Written: September 2019

Abstract

Are market experts prone to heuristics, and if so, do they transfer across closely related domains --- buying and selling? We investigate this question using a unique dataset of institutional investors with portfolios averaging $573 million. A striking finding emerges: while there is clear evidence of skill in buying, selling decisions underperform substantially --- even relative to random selling strategies. This holds despite the similarity between the two decisions in frequency, substance and consequences for performance. Evidence suggests that an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: we document a systematic, costly heuristic process when selling but not when buying.