Practical analysis for investment professionals

behavioral biases


Cutting through the Noise of Volatile Markets

Changing conditions impair the signal-to-noise ratio. Investors should commit more time to looking for deeper explanations for market behavior.

Behavioral Biases: What Is the Weakest Link in the Investment Profession?

How vulnerable are the various classes of investment decision makers to behavioral biases? Is there a difference in the degree to which they are susceptible? We conducted a CFA Institute Financial NewsBrief poll to find out.

Essential Listening: Bowie Bonds

This week's installment of Essential Listening podcasts includes selections on the collapse of oil and commodity prices, behavioral biases, meditation and mindfulness, and more.

The Five Dimensions of Variant Perception

For far too long, the investment industry has failed to recognize the distinction between personal and market perceptions of securities, even though this distinction is at least as important as the fundamental analysis we perform and is absolutely essential to active management.

Investor Psychology: Emerging Markets and a Weakness for Stories

Investors love stories. Narratives can help to make sense of facts and figures. Stories can convey meaning by juxtaposing often unrelated information, and they offer hope. But not all stories have happy endings. The latest chapter of the emerging markets growth story has come as a nasty surprise to many, and there may be worse to come.

The Herding Mentality: Behavioral Finance and Investor Biases

Like a medicine, prospect theory has been prescribed by many as an essential panacea for most if not all investment practitioners. Yet, heuristics — mental shortcuts — and other biases continue to affect some of our professional choices leading us to make mistakes. For a gifted few in the industry, biases are a source of alpha. But for many others biases impose a cost — a price paid for irrationalities.

Weekend Reads for Finance Pros: Reorganization, Bias, and Roosters versus Hens

“We trained hard, but it seemed that every time we were beginning to form into teams we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing, and what… READ MORE ›

Solutions to a Misbehaving Finance Industry

Excessive financialization sucks in talented young graduates from more useful occupations, invents superfluously complex financial products, misdirects investment capital into bubbles, and if unchecked by effective regulation, encourages many evils. So, is this evidence of a finance sector malfunctioning so badly that it will inevitably lead to capitalism's demise?

The Intuitive Investor: Non-Attachment Is the Key Intuition Skill

To succeed as an investor your conscious awareness must be as in accord with reality as possible. Non-attachment means awareness of reality’s pure signal without immediately jumping to conclusions.

How Meditators Can Overcome Behavioral Finance Biases

While behavioral finance identifies and describes cognitive errors, it provides few remedies. But, meditation may provide the answer.



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