How the financial crisis turned everyone into a behavioral economist

What's really depressing is that at the moment the market was approaching a bottom, and I am talking about the very end of 2008 and the first quarter of 2009, investors were continuing to dump stocks.The age-old advice is to buy low, sell high, and not to buy high, sell low. Indeed, I noted several weeks later that the data firm Trimtabs was reporting there were continuing outflows from equity funds in February and March.By the last day of July that year, I was still lamenting that investors were continuing to put money into bond mutual funds but not stock funds: "Despite a notable stock market rally in the first six months of the year (the S&P was up 1.8 percent, but up 36 percent from the March lows) , there were OUTFLOWS from stock mutual funds in the first half of the year of $396 million (there's about $4 trillion in stock funds). Retail investors have been so badly burned by stocks last year that they still do not trust the market; they are showing classic signs of risk aversion by continuing to put money into bonds."And that's what troubled me most. Shiller concluded that investors often make decisions on emotions rather than rational calculations.He was awarded the 2013 Nobel Prize in economics (with Eugene Fama and Lars Peter Hansen) for his contribution to behavioral science and the analysis of asset prices.Same with Richard Thaler, who won the Nobel in 2017 for showing how human traits (limited rationality, lack of self-control) affect market outcomes.It wasn't just the rationality of humans that took a hit.