Financial Daily from THE HINDU group of publications
Sunday, Mar 26, 2006
Financial Daily from THE HINDU group of publications Sunday, Mar 26, 2006 |
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Investment World
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Stock Markets Markets - Stock Markets Adaptive unconscious B. Venkatesh
If he gets a third-party advice on a particular stock, he simply reads the way his body reacts to the information! He claims that he gets a headache when his body "thinks" that he should not buy the stock. If you are amazed at the way my friend buys stocks, do not be. You and I may not buy stocks that way but we sure do adopt similar strategies to buy other goods. We use what psychologists call "adaptive unconscious". Suppose you want to buy a house. You have already seen half a dozen houses and not pleased with any of them. And then you enter this house. You look around and within five minutes, you have decided to buy it, subject to the price! How did you decide? Something within you told you to buy this house. This "within you" effect is what psychologists call adaptive unconscious. You could also call it intuition, though the two are not necessarily the same. Even George Soros is said to be a great believer in adaptive unconscious. He is said to rebalance his exposure in the world markets based on how his back reacts! Research in this area has concluded that it not always advantageous to think long and hard to take a decision. It pays to believe your "inner voice". One study appropriately names this behaviour as "deliberation-without-attention" hypothesis. My friend has trained himself to listen to his "inner voice". Of course, it may take sometime before you learn to read yours, especially for investing in the stock market. But it may be worth the effort. (The author is Head, Research, Navia Markets)
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