Behavioral finance research has shown that individual investors too often invest in stocks that are in the news, and that those stocks then lose money. A recent story in the New York Times illustrates why this may become an even less successful stock investing strategy: program traders are beating average investors to the punch.
Posts Tagged ‘Behavioral Finance’
Why Investing in Stocks in the Headlines Is Not a Good Idea
Posted in Behavioral Finance, Stock Investing, tagged Behavioral Finance, investing, news, stock investing, Terrance Odean on January 6, 2011 | 4 Comments »
Behavioral Finance’s Meir Statman on Why Investors Really Do What They Do
Posted in Behavioral Finance, tagged Behavioral Finance, Elizabeth Warren, Meir Statman, What Investors Really Want on December 9, 2010 | 4 Comments »
Behavioral Finance expert Meir Statman has cast his skeptical eye on the world of individual investors and finds we invest just like we shop for a car or sunglasses — some of us are bargain conscious, some are looking for a chance to show off. We can’t have it all, though we think we should [...]
Carl Richards on Conquering Investing Mistakes and Learning to Talk About Money
Posted in Behavioral Finance, Personalization, tagged AAPL, Behavioral Finance, Behaviorgap, Carl Richards, Jack Bogle, Prasada Capital, Prasada Capital Management on November 15, 2010 | 1 Comment »
Carl Richards has a few thoughts on how we might get around some of our own bad money habits, and he shared them in the video discussion below. A student of behavioral finance, Richards combines that interest with the practical experience of working as a financial advisor in Park City, Utah, where he sees plenty [...]
The Many Errors Investors Make, and a Few Fixes
Posted in Behavioral Finance, tagged Behavioral Finance, investing, Meir Statman, mutual funds, stock investing on November 4, 2010 | 1 Comment »
Behavioral Finance expert Meir Statman teaches finance at Santa Clara University, and he seems to have packed several courses worth of work into his new book, What Investors Really Want. With a droll sense of humor and a skill for drawing parallels between financial behavior and how we act in the rest of our lives, [...]
The Risk Riddle of Investing
Posted in Behavioral Finance, Diversification, Risk, tagged asset allocation, Behavioral Finance, loss aversion, Risk, risk tolerance on November 3, 2010 | 3 Comments »
This is a guest commentary by Paul Keck. The Riddle: Most investors are risk averse, so how do so many of us end up with asset allocations so high in stock that we cannot hold through market downturns? Where does this disconnect come from? Let’s begin by looking at the definition of risk aversion. Behavioral [...]
Your Fund Manager is No Albert Pujols, and Other Lessons from Larry Swedroe’s Investing Tales
Posted in Books, Passive Investing, tagged 401k, Albert Pujols, Behavioral Finance, Christopher R. Blake, Edwin J. Elton, Fordham University, Index Funds, Larry Swedroe, Martin J. Gruber, New York University, Overconfidence, passive investing, Wise Investing Made Simpler on October 21, 2010 | 1 Comment »
Corporate 401(k) plan sponsors pick bad funds for their plans, according to a 2006 study. Then the participants in the plans compound the problem, again picking funds headed for a fall. Why? Because though the Securities and Exchange Commission mandates that funds put in any piece of marketing the disclaimer that past performance is not [...]
Smart Investors Aren’t So Smart
Posted in Behavioral Finance, tagged Behavioral Finance, Boglehead's Unite, Bogleheads, Dunning-Kruger effect, Index Funds, Morningstar, Paul Keck, Smart Investing on September 24, 2010 | 2 Comments »
Commentary by Paul Keck. You might assume from reading the title that I’m saying investors aren’t as smart as they think. Not exactly. What I am saying is the smartest individual investors know they aren’t that smart. They know they aren’t smart enough to: consistently beat the market after costs time things pick the best [...]
Struggling to Rebalance
Posted in Rebalancing, tagged Behavioral Finance, EBRI, Morningstar, portfolio rebalancing, rebalancing, Vanguard on September 23, 2010 | 2 Comments »
Individual investors don’t like to rebalance. According to Congressional testimony given by Dallas Salisbury, CEO of the Employee Benefits Research Institute and one of the nation’s leading experts on retirement and savings, more than 3/4 of all 401 (k) holders never make a change to their asset allocation or rebalance. Not once. Work goes into [...]
Carl Richards on Investing, Emotion and Simplicity
Posted in Behavioral Finance, Long-term investing, tagged Against the Gods, Behavior Gap, Behavioral Finance, Bucks Blog, Carl Richards, Manias Panics and Crashes, Morningstar, Prasada Capital, The Black Swan, The Myth of the Rational Markets, Winning The Loser's Game, Your Money or Your Life on September 21, 2010 | 1 Comment »
Carl Richards, founder of Prasada Capital and a weekly contributor to the New York Times’ Bucks blog, recently took some time out of a busy schedule to talk to Portfolioist. The topic: how investors can get a handle on their own investments.
Behavioral Finance’s Kahneman: Happiness costs $75,000
Posted in Behavioral Finance, tagged Angus Deaton, Behavioral Finance, Daniel Kahneman, Gallup, U.S. Household Income on September 11, 2010 | 2 Comments »
The price of happiness has gone up. In a February speech at the TED Conference, Nobel Prize winner Daniel Kahneman said that it looked liked $60,000 was the figure. Below that you were not happy. Above it, you were satisfied. Satisfaction didn’t climb much as you went up the income ladder from there. But in [...]
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