Practical analysis for investment professionals

behavioral economics


Weekend Reads from India: Cures and Prevention, Time Inconsistency

The preference for cures over prevention is an alluring trap, writes Shreenivas Kunte, CFA, in Weekend Reads from India. Economists have a name for this well-known behavioral trait: time inconsistency.

Best of 2017: Behavioral Finance and India

In his roundup of the best content of 2017, Shreenivas Kunte, CFA, focuses on Richard H. Thaler and other compelling behavioral finance-related content as well the most insightful stories from India.

Top Five Articles from October: Thaler, Trillion-Dollar Coins, Volatility

An unorthodox solution to the US retirement crisis from Sloane Ortel; a discussion of Nobel laureate Richard H. Thaler's contributions to economics by Lauren Foster; and an analysis of the value of self-awareness by Jim Ware, CFA, are among the top EI posts from October.

Nobel Laureate Richard H. Thaler on the End of Behavioral Finance

Richard H. Thaler, the US economist who elevated the word “nudge” from transitive verb to political catchphrase, can now add “Nobel laureate” to his impressive biography. Lauren Foster discusses Thaler's contributions to the field of economics.

The Behavioral Continuum: What’s the Best Behavioral Bias?

Much of the content on behavioral finance carries with it an unnecessary negative spin. Behavioral biases are cast as illogical and counterproductive, potentially even disastrous. And they can be. But behavioral patterns are also useful anchors for successful investment decision making. So we asked readers of CFA Institute Financial NewsBrief which behavioral bias was the most useful.

The Ultimate Satisfice: Is Irrational Behavior Good for Markets?

If it wasn’t for the impulsive, overconfident, irrationally exuberant, cognitively biased masses and their quirky behavior, we would have no markets at all.

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.

Markets Hitting Highs: Unseen Contaminants to Rationality

As markets hit new highs, we explore whether rational economic man, the bedrock of many financial theories and valuation models, is subject to unseen and adverse physiological influences.

Weekend Reads for Finance Pros: Bubbles, Fama and French, and Executive Brains

Have you wondered how an economics book written by a French professor — Thomas Piketty’s tome Capital in the Twenty-First Century with 577 pages of text and graphs plus 78 pages of notes — scaled the best-seller lists on Amazon and the New York Times? As with so many things in life, timing is a factor.

Weekend Reads for Advisers: Luck, Work, and Happiness

Don't fret. This is not the "self-help" edition of weekend reads, even though the headline might lead you to think so. It just so happens that luck versus skill, work (and it's evil twin overwork), and investor happiness are topics tackled in three separate articles.



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