SAN FRANCISCO, June 19 (UPI) -- Most U.S. investors tend to ignore events that are scheduled to happen more than five years into the future, a study found.
Stefano DellaVigna of the University of California at Berkeley and Joshua M. Pollet of the University of Illinois at Urbana-Champaign found few investors could focus on events more than five years ahead -- even predictable events that almost certainly will have a big impact on a company's earnings, reported The New York Times Sunday.
The researchers developed a model of the year-by-year changes in demand caused by shifts in the age distribution of the population for two dozen age-sensitive industries from January 1935 through December 2003.
The study found that when the model predicted a 1 percent increase in demand for an industry's goods or services, its profits that year were 5 percent to 10 percent higher.
If investors conformed to the rational, fully-informed ideal described in textbooks, then they would immediately take into account the long-term effects of a changing population's demographics -- but the researchers found no investors conformed to this ideal.
