FYI: There’s a large body of evidence within the academic literature demonstrating that individual investors have a tendency to overpay for an asset that contains a large payoff in its past payoff distribution. Various explanations for this behavior, which has been shown to negatively impact returns, include overweighting the probability of tail payoffs in decision-making, overestimating the likelihood of high payoff states, and a preference for positively skewed fat-tailed (or lottery-like) distributions, even though such assets have a high likelihood of poor returns and a small probability of extreme positive returns.
Regards,
Ted
http://mutualfunds.com/news/2016/03/15/investors-overweight-the-probability-of-extreme-payoffs/
