Стратегические решения и риск-менеджмент (Dec 2023)
BEHAVIORAL AND COGNITIVE FACTORS IN THE FORMATION OF THE HEURISTIC MODEL OF THE EFFECTIVE INTERPRETER IN INVESTING IN HIGH-TECH COMPANIES
Abstract
The article presents a systematisation of the main factors of cognitive distortions and behavioural heuristics that make the switch to the effective interpreter model irreversible in portfolio investments, especially in high-tech companies. As the heuristic model of the effective interpreter can be perceived as generally increasing the risks in the system for all stakeholders at the current stage of the evolution of the investment system, the author focuses on the most negative manifestations of cognitive and behavioural factors in his description in the publication. However, this does not mean that it is possible or desirable to return to the rational investor model, as narrative and storytelling’s components are too important in the context of ‘new economy’ industry formation and and fast business expansion by disruptive companies. To better interpret the business potential of companies, stakeholders, especially investors, increasingly need to work with narratives, storytelling, aspects of perception and business trust, rather than the numerical values and ratios of financial reporting and analytics. This is partly due to the fact that the intangible assets of companies in the S&P500 index have accounted for up to 90% of the total market capitalisation over the last two decades.The author identifies the most significant cognitive and behavioral factors: the increase in the narrative component of equity value, the ‘fake it till you make it’ approach, the proliferation of cryptocurrencies as the asset with the largest narrative component of value, the boom in IPOs and SPACs in 2020-2021, buybacks as an unproductive signalling tool, the popularisation of chasing triple digit returns based on the survivor bias, the popularity of momentum strategies, the over-reliance on analyst recommendations and assessments, ‘pump and dump’ schemes, investment gamification and investor extroversion, anchoring and framing, the sunk cost fallacy, the lack of rigorous techniques for invalidating investment theses, and the perception of free money in investing over the past decade and a half. Awareness and tracking of at least the most significant behavioural and cognitive factors in the formation and further development of the heuristic model of the ‘effective interpreter’ will help to reduce risks in the financial and investment system of the ‘new economy’ and increase the sustainability of its long-term development.
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