Book Review — Loaded: Money, Psychology, and How to Get Ahead…
A few months ago I had the pleasure of hearing Sarah Newcomb speak at a recent Morningstar ETF conference. She was extraordinary. Although I only [...]
Value investing is quite possibly the worst idea…EVER
n short, value investing the past few years has been a bad experience, but things can get a lot worse before they can get better. Sadly, this is the lot of the value investor. Value investing is really a tragic story of pain, anguish, and heartbreak that never really has a happy ending. The expected gains are almost always offset with extreme relative performance pain.
Behavioral Finance Must See: Thaler’s 2016 Presidential Address
This is a great video to watch over the holiday weekend. Prof. Thaler does a great job walking through behavioral finance/economics. He also has a [...]
Leveraging Persuasion Science to Nudge Investors in a Better Direction
Making choices can be difficult, but possible alternatives can be arranged in a way that facilitates effective decision-making. This is the idea behind “choice architecture,” [...]
Want to Know the Secret to Inefficient Prices? Lazy Prices.
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, [...]
Behavioral Finance Strikes Again: Contrast Effects in Financial Markets
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 [...]
Book Review — The Drunkard’s Walk: How Randomness Rules Our Lives
Although randomness is all around us, we often fail to recognize the profound role it plays in our lives. Evolutionary biology and faulty intuition lead [...]
Alternative Beta can be Great: But Beware of Data-Mining!
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 [...]
How Testosterone and Stress Affect Financial Decision-Making
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 [...]
Computers Still Beat Humans? We Ask, Will Grove Responds.
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 [...]
Recreating Asset Bubbles in the Laboratory
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 [...]
Have benchmarks made us bad active investors?
Curse of the Benchmarks Vayano and Woolley A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Can Losing Lead to Winning?
Can Losing Lead to Winning Berger and Pope A version of the paper can be found here. Want a summary of academic papers with alpha? Check [...]
Why do academic researchers avoid 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 [...]
Chasing Returns and Avoiding “Spaghetti against the Wall Fund Companies”
Psychology research suggests that when we make predictions, we suffer from “representative bias,” mistakenly overweight observations that fit a particular narrative, and fail to consider base rate [...]
Shocking: Your Experience in the Uterus May Influence Your Investment Decisions!
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 [...]
Media Coverage and Stock Returns
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 [...]
Can A Brutal Stock Market Make You Physically Sick?
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 [...]
The most concise explanation of behavioral finance I’ve ever seen
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 [...]
Money Doctors: Will You Trust Them in a Crisis?
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 [...]