An article in CNBC.com offers an overview of seven cognitive biases that can significantly impact investor decision-making. “Given the foundational level at which these biases exist,” the article contends, “they…
Tag: Behavioral Finance
The Psychology of Loss Aversion
An article in Psychology Today discusses loss aversion, and how regulating emotion and taking a different perspective can reduce it—and “help people overcome potentially disadvantageous decision biases.” Loss aversion, the…
Behavioral Finance is Alive and Well
An article in last month’s MorningstarAdvisor provides a “brief tour through the history of behavioral finance” and offers some insights as to what might lie ahead. “Behavioral finance as a…
Ritholtz Says Stock-Picking is Still Alive if Not Kicking
Active fund management has been losing followers but isn’t going away entirely, writes Barry Ritholtz in a recent Bloomberg article. While stock-picking has seen a host of changes, he offers…
Jason Zweig on Investing Fact Versus Fiction
The human mind seeks to “confirm its pre-existing beliefs while ignoring warning signs that we might be wrong,” writes Jason Zweig of The Wall Street Journal. He uses the example…
The Trading Effect
In psychology and behavioral economics, the endowment effect is the hypothesis that people assign more value to things they own. Past studies have shown that experienced securities traders are less susceptible to…
Asness and Arnott Talk Market Timing, Smart Beta and Behavioral Biases
Maybe not always. At least that was the upshot of a debate between Cliff Asness of AQR and Rob Arnott of Research Affiliates, panelists at the recent Morningstar conference in…
Understanding the Behavioral Continuum on Your Way to Becoming a Better Investor
Shreenivas Kunte, director of content at the CFA Institute, recently wrote about the Behavioral Continuum and how it affects our decision making process. He contends that “behavioral patterns extend across…
Emotions and Biases Play Huge Role in Bad Investment Decisions
In a recent New York Times article, columnist Gary Belsky observes that “the majority of cognitive biases and shortcuts that influence everyday judgement and choice have analogues in investment behavior.”…
Grantham Says Our Bias Toward Good News Makes Us Manipulable
In a recent Barron’s excerpt of a longer article, Jeremy Grantham, founder of asset management firm GMO, says Americans “have a broad and heavy bias away from unpleasant data” that…