TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Goalkeepers, investors and uncertainty
With markets at a crossroads, investors are now faced with a conundrum. If they sit on the sidelines, they fear missing out on the risk rally when the rebound happens and if they chase this sell-off aggressively, they might be caught with loses if markets correct further.
Change Size
An investor watches a board showing stock information at a brokerage office in Beijing, China. (Reuters/Jason Lee )
T
he equity bull market posted unusually strong gains in 2019 which continued into early 2020 — but has now been tested with extreme volatility in the recent weeks.
With markets at a crossroads, investors are now faced with a conundrum. If they sit on the sidelines, they fear missing out on the risk rally when the rebound happens and if they chase this sell-off aggressively, they might be caught with loses if markets correct further.
In such a situation, there is much to learn from the game of soccer. In particular, the behavioral bias of a goalkeeper during a penalty kick. When faced with uncertainty, what does a professional goalkeeper facing a penalty kick and an investor have in common?
In a penalty kick, the kicker shoots a stationary ball located 11 meters from the goal, against only a goalkeeper, who remain on the goal-line until the kick is taken. With ball speeds approaching 161 kilometers per hour, it is extremely difficult for goalkeepers to stop a penalty kick, and most of the time, the penalty kick results in a goal.
Therefore, the goalkeeper has to decide beforehand on whether to jump left or right, or stay centered.
This creates an interesting case study of decision making under uncertainty and emotional stress, applicable to both goalkeepers and investors.
According to academic research by Michael Bari-Eli at the Ben Gurion University of the Negev, Israel, titled “Action Bias Among Elite Soccer Goalkeepers: The Case of Penalty Kicks”, goalkeepers jumped to the left or right 94 percent of the time, but even when they guessed the kick direction correctly, they can only prevent 25 to 30 percent of the shots. However, when the goalkeeper did nothing or stayed in the center, they stopped about 60 percent of the kicks to the center.
