The 5 Ways Investors Behave When Things Go Wrong, with Clare Flynn Levy

About this episode

Clare Flynn Levy discusses investor behavior and emotional biases that affect financial decisions, drawing from her experiences as a hedge fund manager during the 2007 financial crisis.

#717: Clare Flynn Levy was a hedge fund manager in London in the summer of 2007, watching her trading screens turn red — every single day. Merger arbitrage spreads were widening. Investors were pulling out. She didn't yet realize she was watching the early tremors of a global financial crisis. Clare joins us to talk about what that experience taught her about investor behavior, emotional bias, and the hidden forces that drive financial decisions. She now runs a firm that helps professional fund managers analyze their own decision-making patterns. Her core argument: most investors aren't making rational choices. They're rationalizing them. We get into two specific biases that cloud judgment — sunk cost fallacy and the endowment effect — and how they show up whether you're picking individual stocks or rebalancing a 529 plan. Clare shares a personal example. After the 2024 election, she moved her kids' college funds from equities into bonds, recorded her reasoning in her calendar, and came back nine months later to review it honestly. She was wrong. Equities kept climbing. But having a written thesis let her make a clean new decision rather than doubling down out of ego. We also…

People in this episode

Host: Paula Pant

Guest: Clare Flynn Levy

Topics covered

• investor behavior
• emotional bias
• financial decisions
• sunk cost fallacy
• endowment effect

Keywords

• investor behavior
• emotional bias
• sunk cost fallacy
• endowment effect
• financial decisions

Mentioned in this episode

Organizations: Cumulus Podcast Network

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