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Bad Judgment Roundup

April 10, 2009

Dumb decisions made by smart investors can lead to crashes in the stock market, and Americans flunk basic science.

To take the California Academy of Sciences science quiz visit: www.calacademy.org.

Transcript

BOB HIRSHON (host):
The psychology of bad investing. I’m Bob Hirshon and this is Science Update.

Researchers at Cornell and the University of Texas at Austin found that a few bad investors can bring down everyone. The scientists found that smart traders who knew that a stock was poor would buy it anyway if they saw the foolish traders doing it. They undervalued their own knowledge of the stock, and assumed the foolish traders must know something that they themselves didn’t. The study helps explain how stockmarket bubbles and crashes happen even when most of the brokers know better.

In other dumbness related news, a study conducted on behalf of the California Academy of Sciences found that about half of American adults can’t answer even basic science questions—like, how long does it take the earth to go round the sun. For a link to the quiz, visit scienceupdate.com. I’m Bob Hirshon for AAAS, the Science Society.