Practical analysis for investment professionals

behavioral biases


Poll: What is the Primary Cause of Speculative Investment Bubbles?

Nearly 38% of global respondents to this week’s poll think the behavioral biases of investors are the primary cause of investment bubbles, while 33% of those polled believe responsibility lies with central banks and their easy money policies. Excessive leverage (19%) and government policies (7%) were less favored responses.

Book Review: The Hour between Dog and Wolf: Risk Taking, Gut Feelings, and the Biology of Boom and Bust

John Coates, senior research fellow in neuroscience and finance at the University of Cambridge, offers a number of fascinating lessons from a booming new field, the biology of risk, revealing how risk taking and stress transform our body chemistry and drive us to irrational exuberance or pessimism. When such chemical surges overwhelm traders and investors, they tend to suffer either euphoric overconfidence or extreme timidity.

Behavioral Finance in Practice: Closing the “Behavior Gap”

So what exactly is the behavior gap? It's what happens when we let emotion get in the way of smart financial decisions. In other words, it's the distance between what we should do and what we actually do.



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