There have been countless studies about the poor decision-making of retail investors, but there has been less work about the quality of supposed smart money, institutional asset managers who are running relatively large portfolios. A recent paper well documents the poor behavior of smart money see "Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors".
The researchers find that the smart money is not as smart as we think especially for on side of their decisions. The market experts seem to do a good job with their being decisions. There is a lot of care with what and when to buy. However, that same caution does not seem to be in place with sell decisions. Sell decisions truly underperform such that it can be no better than a random strategy. There is a lot of cognitive activity associated with buying assets, but there is not the same attention to selling decision.
Even smart money managers can improve their investment decisions by just focusing more time and attention on their sell decisions. This is not trivial nor a throw away action. The sell decisions are often made hastily. Get me out. I am done with this investment.
These poor selling patterns is especially present for winners. You guessed it, smart money managers we more likely to sell winner over losers without regard to the same focus shown when the purchase was made. Heuristics or simple rules will drive selling action in a way not seen with buying decisions.
I would like to believe that smart money will do a good job with both buy and sell decisions, but the data does not point to that conclusion. I can say that I have often seen good managers through in the towel with sell decisions or just decide to get out without strong exist plan. What this research tells us is that investors have to careful with every decision there is no time to be lax.
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