ABSTRACT
People learn through interacting with each other. We talk about our beliefs about investing and seek the opinions of others. The opinions of our neighbors, friends, and colleagues impact our decisions. This allows more social people to gain confidence in their investing activities. Investment clubs are a formalized process of investing socialization. But clubs with a stricter investment procedure have more success than clubs focused on social activities. One outcome of social interaction is that investors tend to herd into the same stocks.
The media transmits much of the information we use to make investment decisions. Vivid language, or hype, influences the investors with contrarian positions. Unfortunately, investors tend to react too quickly to news stories. In fact, individual investors react to news that contains stale information. Or news that contains little important information-like company name changes. This short-term focus can be costly.
