Behavioral Finance

///Behavioral Finance

Why do academic researchers avoid behavioral finance?

By |2017-08-18T16:52:14+00:00March 11th, 2016|Behavioral Finance|

Charlie Munger, Warren Buffett's right-hand-man and Vice Chairman of Berkshire Hathaway, has said the following regarding behavioral economics: How could economics not be behavioral? If it isn’t behavioral, what the hell is it? Apparently, academic researchers [...]

Chasing Returns and Avoiding “Spaghetti against the Wall Fund Companies”

By |2017-08-18T17:08:13+00:00February 20th, 2016|Behavioral Finance|

Psychology research suggests that when we make predictions, we suffer from “representative bias,” and mistakenly overweight observations that fit a particular narrative, and fail to consider base rate probabilities. For example,  if we flip a coin 5 times [...]

Shocking: Your Experience in the Uterus May Influence Your Investment Decisions!

By |2017-08-18T16:57:00+00:00February 16th, 2016|Research Insights, Behavioral Finance|

The Fetal Origins Hypothesis in Finance: Prenatal Environment, the Gender Gap, and Investor Behavior Cronqvist, Previtero et al. A version of the paper can be found here. Want a summary of academic papers with alpha? Check [...]

Media Coverage and Stock Returns

By |2017-08-18T17:00:55+00:00February 9th, 2016|Research Insights, Behavioral Finance, Momentum Investing Research|

Ninety Years of Media Coverage and the Cross-Section of Stock Returns Hillert and Ungeheuer A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap [...]

Can A Brutal Stock Market Make You Physically Sick?

By |2017-08-18T17:08:32+00:00February 6th, 2016|Research Insights, Behavioral Finance|

Worrying About the Stock Market: Evidence from the Hospital Admissions Engelberg and Parsons A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap [...]

The most concise explanation of behavioral finance I’ve ever seen

By |2017-08-18T16:55:27+00:00January 29th, 2016|Research Insights, Behavioral Finance|

One of the most overused-- and misunderstood -- terms I've seen used by finance practitioners is "behavioral finance." Many professionals consider themselves to be "behavioral finance experts" because they identify irrational investors.1 Newsflash: Identifying irrational investors is not [...]

Are Stock Pricing Anomalies Driven by Risk or Mispricing?

By |2017-08-18T17:10:07+00:00December 15th, 2015|Research Insights, Behavioral Finance|

Anomalies and News Engelberg, McLean and Pontiff A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: Using a sample of 97 [...]

The Secrets of Social Influence: An Interview With Digg and Wharton Professor Jonah Berger

By |2017-08-18T16:55:12+00:00December 8th, 2015|Interviews, Behavioral Finance|

A critical element of being a good investor is understanding human behavior. In this piece we take our focus away from quantitative finance and focus on understanding the secrets of social influence. And while this piece may not [...]

Beware of Target Date Funds – Their Aim May be Way Off

By |2017-08-18T17:09:18+00:00November 3rd, 2015|Guest Posts, Behavioral Finance|

We like to use rules of thumb, or heuristics, when facing choices.  We often default to rules of thumb because when finding the optimal choice is difficult, rules of thumb allow us to solve a [...]

All firms can benefit from the positive influence of women

By |2017-08-18T17:10:44+00:00October 29th, 2015|Behavioral Finance|

Marisa Mayer’s recent announcement that she is again pregnant, and does not plan to take maternity leave after her twins arrive, has once again raised the age-old question about how far women have really come [...]

How Market Volatility Affects Our Brains

By |2017-08-18T17:03:35+00:00September 2nd, 2015|Behavioral Finance, $vxx, Tactical Asset Allocation Research|

The current market volatility is justifiably causing people stress. Nobody wants to see their hard-earned wealth get vaporized. But how does increased stress affect decision-making? A recent paper published in the Proceedings of the National Academy [...]

The Sustainable Active Investing Framework: Simple, But Not Easy

By |2018-07-16T15:25:05+00:00August 17th, 2015|Key Research, Behavioral Finance|

We cannot overemphasize that identifying sustainable alpha in the market is no cakewalk. More importantly, being smart, having superior stock-picking skills, or amassing an army of PhDs to crunch data is only half of the equation. Even with those tools, you are still only one shark in a tank filled with other sharks. All sharks are smart, all sharks have a MBA or PhD from a fancy school, and all the sharks know how to analyze a company. Maintaining an edge in these shark infested waters is no small feat, and one that only a handful of investors has accomplished.In order to achieve sustainable success as an active investor, one needs not only skill, but also an understanding of human psychology, and an appreciation of market incentives (behavioral finance). We start our journey where mine began: as an aspiring PhD student studying at the University of Chicago. Let the adventure begin...This post is not meant to convert a passive investor into an active investor; however, we do explain why we believe active investing can sustainably beat passive strategies in the long run. Plus, we bring to bear many years of cumulative research and experience to support our arguments.We cannot overemphasize that alpha in the market is no cakewalk. More importantly, being smart, having superior stockpicking skills, or amassing an army of PhDs to crunch data is only half of the equation. Even with those tools, you are still only one shark in a tank filled with other sharks. All sharks are smart, all sharks have a MBA or PhD from a fancy school, and all the sharks know how to analyze a company. Maintaining an edge in these shark infested waters is no small feat, and one that only a handful (e.g., we can count them in one hand) of investors has successfully accomplished.In order too achieve sustainable success as an active investing, one needs both skill and an understanding of human psychology and market incentives (behavioral finance). We start our journey where mine began: as an aspiring PhD student studying under Eugene Fama at the University of Chicago. Let the adventure begin...

P/E “Attention” Strategies Earn Monthly Excess Return of 1%!

By |2017-08-18T16:59:31+00:00July 23rd, 2015|Research Insights, Behavioral Finance|

Rankings of Published Pricing-earnings Ratios and Investor Attention Jordan Moore A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: Active investors [...]

How to Make Money in Markets: Understanding Expectation Errors

By |2017-08-18T17:03:19+00:00June 24th, 2015|Behavioral Finance, Value Investing Research, Yahoo Tickers, $SPY|

A new working paper from Gennaili, Ma, and the one-the-only Andrei Shleifer. Expectations and Investment Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well [...]

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