Taylor Swift is scheduled to bring her world tour to Asia from February to March 2024, and the enthusiasm surrounding the event has been overwhelming, particularly in Singapore.
Before the official ticket release, UOB cardholders were given the exclusive opportunity to purchase tickets. This privilege resulted in a remarkable surge in credit card applications from Singapore, Thailand, Malaysia, Indonesia, and Vietnam. During the week Taylor Swift announced her concert dates, the number of daily credit card applications increased by an average of 45 percent compared to previous weeks in the same month, as reported by the bank.
The ticket frenzy was evident when customers started receiving queue numbers in the millions just 10 minutes after the private booking for UOB cardholders began at 12:10 pm. By 3 pm, it was announced that all UOB Cardmembers pre-sale tickets had been completely sold out.
Two days prior to the public ticket sales, fans lined up outside Singapore Post outlets, even camping overnight, in order to secure their tickets.
While some onlookers may find such behavior bewildering, it is not fundamentally different from the patterns observed in investing behavior. After all, humans are humans, and we exhibit similar tendencies in various aspects of our lives.
The initial phenomenon we have observed can be identified as the Bandwagon Effect, also known as the Fear of Missing Out (FOMO). It occurs when an individual desires to participate in an activity or possess something simply because others are doing the same or acquiring it.
I encountered someone who queued for the tickets, not primarily because of their deep admiration for Taylor Swift, but because she found thrill in the anticipation of getting the tickets. Furthermore, she considered the possibility of selling the tickets to others if she was successful in obtaining them.
Hence, it is plausible that a group of buyers exists who are not genuine fans but rather join the bandwagon for the thrill it offers.
We can observe a similar Bandwagon Effect in the stock, cryptocurrency, and property markets. When there is a prevailing bullish sentiment and asset prices continue to rise relentlessly, it becomes difficult to resist the temptation of buying into the market. This is especially true when we witness people around us making substantial profits. As a result, investors often find themselves drawn to invest at the market’s peak, as this is when the Bandwagon Effect is most prominent. Investors don’t buy low, they buy excitement.
The Recency Bias impacts both music enthusiasts and investors in a similar manner. I examined Spotify’s daily chart and noticed that Taylor Swift’s 10 songs had secured positions within the top 20 songs in Singapore. Many of these songs had experienced significant leaps in their rankings. This data suggests that more people have been listening to her songs recently, likely influenced by the frenzy surrounding ticket sales for her concert.
However, it’s important to note that between 2014 and 2023, Taylor Swift’s songs did not even make it to the top 100 most listened-to songs in Singapore. This observation raises questions about the true number of authentic Taylor Swift fans during that period.
When it comes to investing, we often devote considerable attention to the recent happenings and media reports. Currently, the prevailing trend revolves around artificial intelligence (AI), with many investors strongly believing in its future potential and seeking opportunities to invest in AI stocks. In the past, trends have focused on electric vehicles (EVs) or cryptocurrencies, just to name a few.
However, the challenge arises from the influence of the Recency Bias, which leads us to give excessive weight and attention to the latest trend, such as AI. This bias can distort our perception and cause us to view AI through an overly optimistic lens. While AI undeniably holds genuine applications and positive impacts on our lives, it is crucial to acknowledge that there is also a layer of hype surrounding AI-related stock prices. This hype may not always align with the actual value or long-term prospects of these investments.
Lastly, there is the Endowment Effect, which refers to our tendency to assign a higher value to something we possess compared to its actual market worth. Those fortunate enough to acquire Taylor Swift tickets would certainly place a greater value on them than the price they originally paid. This valuation includes factors such as the time spent queuing, waiting, and the effort invested in obtaining the tickets. If they were to consider selling the tickets, they would expect significantly higher prices to compensate for the intangible sacrifices they made. For instance, one person attempted to sell a pair of Cat 2 tickets for $5,000, nearly eight times the original price.
Similarly, investors tend to place higher value on the stocks they hold compared to the prevailing market prices. Otherwise, they would have sold them already.
The Endowment Effect is closely linked to Anchoring and Loss Aversion Bias. For instance, suppose an investor purchased a stock at $10, and its current share price has dropped to $5. The investor becomes anchored to the original purchase price and perceives it as the true value of the stock, even if the underlying fundamentals have deteriorated. The Endowment Effect prevents them from fully recognizing the weakening state of the business and leads them to overvalue the stock.
Additionally, selling the stock would entail realizing a loss, triggering the Loss Aversion Bias that discourages investors from taking such action. This emotional bias further contributes to the tendency of holding onto stocks despite their declining fundamental value.
Therefore, it is evident that as human beings, we are fallible and frequently succumb to various cognitive biases, whether we are purchasing concert tickets or making investment decisions in the markets. Don’t dismiss those queuing for Taylor Swift tickets as we suffer from the same biases. These biases affect us equally across different aspects of our lives.
Hi Alvin
Cool article on Behavioural biases!
I have also written a piece on Taylor Swift. Hope that you will like and subscribe!