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Talking Stocks

Conversing about investments helps us gather information, understand social norms, and ultimately make decisions for ourselves. Talking about our investments is an important part of the decision-making process. We discuss our own stocks and mutual funds and those of our friends, colleagues, and family members. This conversation is more than just a relaying of information. We read the emotional responses of those we talk to, and this affects our own feelings about the topic. Decisions are based as much on how you feel about the alternatives as on information about them.

Social norms of conversation affect the method of these conversations. That is, rules of polite conversion dictate that specific information is more likely to be discussed than abstract topics. This means that we would rather talk about a specific company than discuss what the appropriate amount of international stocks in our portfolio might be. We prefer to talk about our favorite mutual fund than to discuss ways to minimize our level of risk. Consider phone-in radio and TV investment shows. Most questions to the experts deal with a specific stock: Should I sell now? Will the price come back up? How will the acquisition affect the company? What do you predict about the technology industry? Very few questions on these shows are asked about hedging risk or what allocation of bonds would be appropriate.


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