Behavioral Finance

//Behavioral Finance

Behavioral Finance Strikes Again: Contrast Effects in Financial Markets

By | 2017-08-18T17:09:30+00:00 May 19th, 2016|Research Insights, Behavioral Finance|

At this point, even hard core efficient market fans will likely admit that behavior can influence investment decisions. Humans aren't robots. However, just because some investors exhibit bad behavior that doesn't mean they can influence prices. As the story [...]

How Market Volatility Affects Our Brains

By | 2017-08-18T17:03:35+00:00 September 2nd, 2015|$vxx, Behavioral Finance, 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 [...]

Comments Off on How Market Volatility Affects Our Brains

All firms can benefit from the positive influence of women

By | 2017-08-18T17:10:44+00:00 October 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 [...]

Are Stock Pricing Anomalies Driven by Risk or Mispricing?

By | 2017-08-18T17:10:07+00:00 December 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 [...]

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

By | 2017-08-18T17:09:18+00:00 November 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 [...]

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

By | 2017-08-18T16:57:00+00:00 February 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 [...]

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

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

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 [...]

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

Media Coverage and Stock Returns

By | 2017-08-18T17:00:55+00:00 February 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 [...]

Comments Off on Media Coverage and Stock Returns

Money Doctors: Will You Trust Them in a Crisis?

By | 2017-08-18T17:00:10+00:00 January 19th, 2016|Behavioral Finance|

Do you trust your doctor? If you're like most people, chances are good that you do. And why not? What do you know about medicine anyway? But who do you trust when it comes to [...]

Comments Off on Money Doctors: Will You Trust Them in a Crisis?

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

By | 2017-08-18T16:55:27+00:00 January 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 [...]

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

By | 2017-08-18T17:08:13+00:00 February 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 [...]

Can A Brutal Stock Market Make You Physically Sick?

By | 2017-08-18T17:08:32+00:00 February 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 [...]

Want to Know the Secret to Inefficient Prices? Lazy Prices.

By | 2017-08-18T16:52:52+00:00 June 13th, 2016|Research Insights, Behavioral Finance|

How do you handle repetitive tasks? If you're like most people, you work through a task in a variety of ways, find the most efficient approach, and then stick to that workflow. Consider email address autofill, automatic [...]

Why do academic researchers avoid behavioral finance?

By | 2017-08-18T16:52:14+00:00 March 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 [...]

Comments Off on Why do academic researchers avoid behavioral finance?

Recreating Asset Bubbles in the Laboratory

By | 2017-08-18T16:58:00+00:00 March 29th, 2016|Research Insights, Behavioral Finance, Momentum Investing Research|

Are we in a bubble? It depends on what asset class you’re referring to, whom you ask, and what you mean by “bubble.” We’ve posted before on how some great finance minds define bubbles, and [...]

Computers Still Beat Humans? We Ask, Will Grove Responds.

By | 2017-08-18T17:07:56+00:00 April 21st, 2016|Behavioral Finance|

Overconfidence is the death of everything in investing. I suffer from the problem just like everyone else because last time I checked...I'm human. As humans, we need to face the reality of overconfidence. Overconfidence is like [...]

Comments Off on Computers Still Beat Humans? We Ask, Will Grove Responds.

How Testosterone and Stress Affect Financial Decision-Making

By | 2017-08-18T17:03:31+00:00 May 3rd, 2016|Behavioral Finance|

Decision Making, Financial Risk Aversion and Behavioral Biases: The Role of Testosterone and Stress Nofsinger, Patterson and Daigler A version of the paper can be found here Want a summary of academic papers with alpha? Check [...]

Comments Off on How Testosterone and Stress Affect Financial Decision-Making

Alternative Beta can be Great: But Beware of Data-Mining!

By | 2017-08-18T17:10:40+00:00 May 9th, 2016|Research Insights, Behavioral Finance|

Quantifying Backtest Overfitting in Alternative Beta Strategies Antti Suhonen, Matthias Lennkh, and Fabrice Perez A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap [...]

Comments Off on Alternative Beta can be Great: But Beware of Data-Mining!