In recent interview with Barron’s, award-winning poker player Annie Duke shares insights about how investors can remove emotions from decision-making and “how global markets are really just one giant poker table.” Here are highlights from the interview: On today’s uncertain environment, Duke contends, “The coronavirus is so clearly uncertain that people are more open-minded today, and because of that you can actually learn.” On decision-making and timing, Duke argues that businesses today are facing particularly… Read More
In a recent episode of the Validea podcast Excess Returns, Justin Carbonneau and Jack Forehand had an in-depth discussion about the coronavirus pandemic with Daniel Crosby, Ph.D., chief behavioral officer for Brinker Capital. Specifically, Dr. Crosby shared valuable insights and tips regarding human psychology, behavioral finance, the market and how investors can avoid making poor decisions during this time of uncertainty. Here are some highlights from the interview: Crosby referenced the 5-factor model for wellness… Read More
In this week’s episode we shift gears a little from our usual investing focus. We wanted to spend some time talking about the current COVID-19 crisis and its impact on all of us as people. To do that, we brought in an expert of human psychology and behavioral finance, Dr. Daniel Crosby. Daniel is the author of the Behavioral Investor and the Chief Behavioral Officer at Brinker Capital. In the interview, we discuss: What we… Read More
Researchers on game theory say that poker strategies can translate into lessons for investors, according to a recent article in The Wall Street Journal. Carnegie Mellon professor of philosophy Kevin Zollman says that investors dislike losing more than winning and are prone to what behavioral finance refers to as the disposition effect, which leads them to sell assets that have increased in value but hold onto those that have decreased in value. The same behavior… Read More
By Jack Forehand (@practicalquant) Factor investing has grown dramatically in recent years. But it is far from new. As those of us who invest using factors seek to learn more about them and the best way to utilize them in our portfolios, there is no better place to turn than those who have been there since the beginning. For this week’s interview, I have the privilege of talking to Jim O’Shaughnessy. Jim was a factor… Read More
The bull run that followed the 2008 financial crisis is widely considered the greatest of the past century, but according to an article in The New York Times, “despite the superlatives, this rally’s primary characteristic is how much skepticism it generated.” The article points out that the rally of the past decade has not reached the “intensity of gains that defined the stock market bubbles of the 1920s and 1990s.” Instead, it explains, many investors… Read More
By Jack Forehand (@practicalquant) — Factor Investing poses some interesting challenges for wealth managers. On one hand, the evidence is very strong that investing using factors produces superior to returns to market cap weighted indexes over the long-term. On the other, factor strategies introduce another set of behavioral problems for clients because the extended periods of underperformance that are common in factor investing can lead to bad decision making and underperformance relative to index funds… Read More
In a September interview on the Off the Chain podcast, legendary investor James O’Shaughnessy shared insights on human nature, psychology, and how they manifest in investing decisions. Here are some highlights: On cryptocurrency, O’Shaughnessy explained that he doesn’t know enough to be a “bull or bear.” O’Shaughnessy believes that crytocurrency, which is based on a deflationary monetary model, has some appealing aspects and might represent a store of value if it saw less volatility. But… Read More
An article in The New York Times by Nobel Laureate Robert Shiller argues, “The more we learn about how people really think, the more we must rethink economic theory.” Shiller highlights the findings of two new studies that show how people “systematically change their beliefs in thinking about the financial future.” The authors of the 2018 paper, he reports, “attribute some of the economic pain that occurred after the 2008 financial crisis to a change… Read More
The market’s resilience over the past year might be due to an investor perception that they are “playing with house money,” according to a Barron’s article. The article explains that this human tendency is rooted in behavioral finance research findings showing how the human brain suffers more from loss than it feels pleasure from the same amount of gain. Nicholas Colas, co-founder of firm DataTrek, says this runs counter to much of classical economic thought. In… Read More