As November drew to a close, the Business School, in collaboration with the CFA UK’s Scottish Committee, orchestrated a thought-provoking session titled "Investment in Sleep: Sleep, investment decisions and financial markets," lead by Professor Arman Eshraghi from Cardiff University. The lecture finished with an open discussion amongst a diverse audience, spanning students to industry experts, illuminated current and potential literature. Student Ambassador, Neeraja Nair Puthusseril Anilkumar, shares what she found most interesting from the event.
Image of Lead Speaker Arman Eshraghi

In a world that never sleeps, researchers globally have delved into the repercussions of sleep deprivation on the financial market for decades. The ripple effect of sleep deprivation on psychological and cognitive aspects, alongside mental health, has been well-established. Shockingly, 1 in 5 people in the UK suffers from sleep deprivation, transcending professional boundaries. Yet, in monetary terms, even an hour less sleep can translate into the loss of billions for financial market participants. Prof Eshraghi's presentation showcased research papers revealing how the change in daylight savings time could lead to a market decline of almost 25 basis points, affecting up to 80% of countries globally. Although seemingly minor, such a dip in S&P 500 could result in a staggering loss of up to $100 billion. The discussion further explored how sleep deprivation induces risk aversion in investors and diminishes their information processing capacity, particularly among those in the early stages of their careers.

The latter part of the session delved into the impact of streaming services on sleep and, consequently, the financial market. An intriguing moment arose when the CEO of Netflix declared, "Sleep is our competition." Academic observations have linked the release of blockbuster series during midnight to a decline in market returns the next day, attributing this to sleep loss. This phenomenon, viewed as a proxy for analyzing the correlation between sleep and financial decisions, adds an interesting dimension to research.

Prof Eshraghi highlighted that market returns decline as buying decisions tend to be swift and heuristic, whereas selling decisions demand more cognitive effort, severely impacted by sleep loss. This dynamic results in investors excelling in buying decisions but under performing significantly in selling decisions. Surprisingly, gaining an extra hour of sleep showed negligible impact on traders. The duration of these market dips typically spanned 2 to 3 days, occurring occasionally.

The session concluded with an open discussion between the audience and the guest speaker, evolving into an interactive informal exchange. An insightful evening indeed!

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