People avoid information they expect to be unwelcome, monitoring investments and diagnoses less often when the news is likely bad.
Galai and Sade coined the term in a paper dated 2003 for an asset-pricing and liquidity anomaly. The specific claim that investors check portfolios less often in falling markets was tested by Karlsson, Seppi and Loewenstein, and later investor data have produced the opposite meerkat pattern.
In practice
- An investor stops opening the monthly statement in a falling market and resumes when it recovers.
- A manager stops running the report that shows the churn figure, and would say they had simply been busy.
- Possible explanations
- The explanation is anticipated regret: checking turns a suspected loss into a certain one, so avoidance protects the feeling rather than the portfolio.
- In its favour
- Information avoidance is well documented in other domains, including medical testing, where people decline results they expect to be unwelcome.
- Against it
- Later investor data show the opposite pattern, with attention rising in falling markets, so the effect may be specific to particular markets, periods or investor types.
- Standing
- Later investor data have produced the opposite meerkat pattern, with attention rising in falling markets.
- Further reading
- Wikipedia
- Subject
- Decision-making & Reasoning
- Essay
- The catalogue of predictable errors