50 Psychological Experiments for Investors - download pdf or read online

By Mickäel Mangot

ISBN-10: 1118580346

ISBN-13: 9781118580349

Great e-book! Mickäel has performed a superb task of explaining the insights from over 50 groundbreaking mental experiments. you'll how you can steer clear of a number of the mental errors made through such a lot traders. He teaches you to observe out for overconfidence and the momentum bias to prevent huge losses. He enables you to know the way your social relationships can swap your asset allocation chance profile. Forearmed is forewarned. for those who practice Mickäel's insights, you are going to increase your funding performance.

Paul Stefansson
Executive Director, UBS AG

Why are traders occasionally their very own worst enemies? As this eminently readable booklet exhibits, all kinds of biases impact traders' judgments, starting from sheer lack of know-how and feelings to overconfidence or aversions, from chosen momentary reminiscence to undue generalizations. development at the increasing literature in behavioral economics, the experiments said the following shed an invaluable, frequently humorous, light...

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Example text

The concept of compounding does not pose any particular problem for the average investor. Its calculation, on the other hand, is much more problematic. The process of compounding is systematically underestimated because it involves an exponential function. In practice, people would proceed in two steps to evaluate the accumulated amount. First they would calculate the capital at the end of the period as if the interest had not been reinvested each year using a linear function and then would adjust this value to take into account the compounding of the interest.

A family which left an expensive city (say, New York) to go to live in Arkansas would buy its new house at a price 22 percent greater than a family who moved to the same city in Arkansas but who came from a city which is two units less expensive than New York. The wealth of an owner-family moving into a less expensive city surely must, however, affect the increase attributable to this single point of reference. To avoid this source of confusion, the authors continued their study but only on renters.

CHAPTER 1 A Love of Anecdotes How We Choose Information on Fallacious Criteria SUMMARY 1. Why do you think you have to invest in the stock market when prices have skyrocketed? Momentum bias 2. Why do you buy stocks when the market has gone up and bonds when the market has gone down? Momentum management 3. Why are you sure that everyone agrees with your view that the market is going to go up? False consensus 4. Why does Google’s success make you want to invest in high-tech? The availability heuristic 5.

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50 Psychological Experiments for Investors by Mickäel Mangot

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