Dreaming of being an investment shark? Better figure out if you're an
`owl' or a `lark,' study finds
Time of day can have significant impact on choosing wise investments


Date:
November 15, 2021
Source:
University of Central Florida
Summary:
If you're a night owl looking to invest in the next big startup,
making that decision first thing in the morning might not be the
best idea, according to a new study.



FULL STORY ==========================================================================
The early bird might get the worm, but if you're a night owl looking
to invest in the next big startup, making that decision first thing
in the morning might not be the best idea, according to a new study by researchers at Indiana University and the University of Central Florida.


==========================================================================
The study, which appears in the Journal of Business Venturing, shows
time-based factors, like time of day and whether you're a morning or
evening person, can influence investment decisions and your ability to
evaluate whether a startup will be successful.

"Early-stage investments -- when not a lot is typically known about
a company and the time to make a decision is compressed -- can be
risky with high failure rates," said Jeff Gish, assistant professor
of management at UCF and a co- author of the story. "Trying to pick a
winner is difficult enough under those circumstances, but we've also
learned that when you make those decisions can have a significant
impact on whether they turn out to be successful." Individuals have
an internal clock called circadian rhythm that regulates our alertness
and awake-sleep cycles. In general, individuals tend to fall into three
general types with respect to what time of day they are more awake and
alert in a 24-hour cycle. Those with a circadian process shifted earlier
in the day are known as larks, while owls are more alert later in the
day. The third group of individuals is the intermediate.

"What we found was when individuals evaluated an investment opportunity
at a time that conflicted with their body's natural internal clock --
for example, a morning person or lark making a decision late in the
day or evening -- they tended to make poor choices," says Cristiano
Guarana, assistant professor of management and entrepreneurship at the
IU Kelley School of Business and a co- author. "This tension may not be recognized by those making the investment decision and over time could
result in substantial losses for people who, on average, possess much
less investment knowledge than angel investors and venture capitalists."
Gish and Guarana each have studied how lack of sleep affects cognitive
skills needed to be successful in evaluating ideas and making business decisions. Gish has founded multiple businesses and now invests in others' entrepreneurial ventures.

How the study was conducted The three-part study looked at early-stage investment decisions via equity crowdfunding where non-professional
investors can invest a relatively small amount for an ownership stake
in a startup. Study participants were recruited from social media
accounts for active followers of several leading equity crowdfunding
platforms in the U.S. -- such as Wefunder, Fundable, and EquityNet --
and surveyed about whether they were a morning versus an evening person,
their investment experience and time zone information.

Participants were then asked to complete a decision-making task
at an assigned time; for example, if they had had $1,000 to invest,
how much would they allocate to certain companies? The companies being evaluated were based on actual investment opportunities, including several desirable opportunities that had performed well and several undesirable opportunities that had performed poorly. Participants also were asked
to report their sleep quantity and crowdfunding experience.

The study showed that owl investors invested more than lark investors in
an unsuccessful venture in the morning, while lark investors invested
more than owl investors in an unsuccessful venture in the evening. The
same types of errors occur, in the opposite direction, with successful ventures.

With sites StartEngine, Microventures and others making it easier than
ever for amateur investors to jump into equity crowdfunding with the
click of a button, determining when you are best equipped to make those decisions could impact your wallet.

"Prospective equity crowdfunding investors, who may be making
decisions before or after their normal daily work schedule, should
be cognizant of the time they select to mull investment choices,"
Gish says. "These investors would do well to match their lark
or owl tendencies with the timing of their investment decisions." ========================================================================== Story Source: Materials provided by
University_of_Central_Florida. Original written by Erika Hodges. Note:
Content may be edited for style and length.


========================================================================== Journal Reference:
1. Cristiano L. Guarana, Regan M. Stevenson, J. Jeffrey Gish, Ji
Woon Ryu,
Rohan Crawley. Owls, larks, or investment sharks? The role of
circadian process in early-stage investment decisions. Journal of
Business Venturing, 2021; 106165 DOI: 10.1016/j.jbusvent.2021.106165 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2021/11/211115123435.htm

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