By Jason Leupold via Iris.xyz
With the firing of prominent coach, Les Miles, of LSU, just 24-hours after a loss to Auburn, it reminded us how investors sometimes base their investing decisions on short-term performance.
Numerous studies (e.g., Study 1, Study 2) have linked poor investor performance to short-term performance chasing. When determining whether or not to sell an investment, or fire a coach, the decision should hinge on what has changed from the original thesis that led to the hiring/investment in the first place.
In this case, did the LSU athletic director believe that Coach Miles had changed his Tiger stripes, or did he make a call that Miles “just doesn’t have it any more”? We’d hazard a guess that it was the later. People love to go with their gut, to be decisive, and to act rather than analyze.
As with most things in life, a longtime horizon and a clear objective will likely pay off in the long run.
Having an emphasis on the short-term tends to promote bad behavior and create instability within advisory practices, or football teams. If investors become solely focused on the short-term, it creates an incentive for managers to take greater risks, or in the case of college football, potentially violate NCAA rules.