Book Description
This book offers a definitive and wide-ranging overview of developments in behavioral finance over the past ten years. In 1993, the first volume provided the standard reference to this new approach in finance--an approach that, as editor Richard Thaler put it, "entertains the possibility that some of the agents in the economy behave less than fully rationally some of the time." Much has changed since then. Not least, the bursting of the Internet bubble and the subsequent market decline further demonstrated that financial markets often fail to behave as they would if trading were truly dominated by the fully rational investors who populate financial theories. Behavioral finance has made an indelible mark on areas from asset pricing to individual investor behavior to corporate finance, and continues to see exciting empirical and theoretical advances.
Advances in Behavioral Finance, Volume II constitutes the essential new resource in the field. It presents twenty recent papers by leading specialists that illustrate the abiding power of behavioral finance--of how specific departures from fully rational decision making by individual market agents can provide explanations of otherwise puzzling market phenomena. As with the first volume, it reaches beyond the world of finance to suggest, powerfully, the importance of pursuing behavioral approaches to other areas of economic life.
The contributors are Brad M. Barber, Nicholas Barberis, Shlomo Benartzi, John Y. Campbell, Emil M. Dabora, Daniel Kent, François Degeorge, Kenneth A. Froot, J. B. Heaton, David Hirshleifer, Harrison Hong, Ming Huang, Narasimhan Jegadeesh, Josef Lakonishok, Owen A. Lamont, Roni Michaely, Terrance Odean, Jayendu Patel, Tano Santos, Andrei Shleifer, Robert J. Shiller, Jeremy C. Stein, Avanidhar Subrahmanyam, Richard H. Thaler, Sheridan Titman, Robert W. Vishny, Kent L. Womack, and Richard Zeckhauser.
Customer Reviews:
BF--Investment sentiment and limit of arbitrage.......2006-01-29
This book is a good guide for Behavioral Finance. This book is excellent paradoxically for someone who already know traditional efficient market hypothesis.
Amazon.com
Economics is not widely considered to be one of the sexier sciences. The annual Nobel Prize winner in that field never receives as much publicity as his or her compatriots in peace, literature, or physics. But if such slights are based on the notion that economics is dull, or that economists are concerned only with finance itself, Steven D. Levitt will change some minds. In Freakonomics (written with Stephen J. Dubner), Levitt argues that many apparent mysteries of everyday life don't need to be so mysterious: they could be illuminated and made even more fascinating by asking the right questions and drawing connections. For example, Levitt traces the drop in violent crime rates to a drop in violent criminals and, digging further, to the Roe v. Wade decision that preempted the existence of some people who would be born to poverty and hardship. Elsewhere, by analyzing data gathered from inner-city Chicago drug-dealing gangs, Levitt outlines a corporate structure much like McDonald's, where the top bosses make great money while scores of underlings make something below minimum wage. And in a section that may alarm or relieve worried parents, Levitt argues that parenting methods don't really matter much and that a backyard swimming pool is much more dangerous than a gun. These enlightening chapters are separated by effusive passages from Dubner's 2003 profile of Levitt in The New York Times Magazine, which led to the book being written. In a book filled with bold logic, such back-patting veers Freakonomics, however briefly, away from what Levitt actually has to say. Although maybe there's a good economic reason for that too, and we're just not getting it yet. --John Moe
Book Description
Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? What kind of impact did Roe v. Wade have on violent crime?
These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He is a much heralded scholar who studies the stuff and riddles of everyday life-;from cheating and crime to sports and child rearing-;and whose conclusions regularly turn the conventional wisdom on its head. He usually begins with a mountain of data and a simple, unasked question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: freakonomics.
Through forceful storytelling and wry insight, Levitt and co-author Stephen J. Dubner show that economics is, at root, the study of incentives-;how people get what they want, or need, especially when other people want or need the same thing. In Freakonomics, they set out to explore the hidden side of ... well, everything. The inner workings of a crack gang. The truth about real-estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Ku Klux Klan.
What unites all these stories is a belief that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and-;if the right questions are asked-;is even more intriguing than we think. All it takes is a new way of looking. Steven Levitt, through devilishly clever and clear-eyed thinking, shows how to see through all the clutter.
Freakonomics establishes this unconventional premise: If morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But Freakonomics can provide more than that. It will literally redefine the way we view the modern world.
Download Description
"
Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? What kind of impact did Roe v. Wade have on violent crime?
These may not sound like typical questions for an economist to ask. But
Steven D. Levitt is not a typical economist. He is a much heralded scholar who studies the stuff and riddles of everyday life -- from cheating and crime to sports and child rearing -- and whose conclusions regularly turn the conventional wisdom on its head. He usually begins with a mountain of data and a simple, unasked question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: freakonomics.
Through forceful storytelling and wry insight, Levitt and co-author
Stephen J. Dubner show that economics is, at root, the study of incentives -- how people get what they want, or need, especially when other people want or need the same thing. In
Freakonomics, they set out to explore the hidden side of ... well, everything. The inner workings of a crack gang. The truth about real-estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Ku Klux Klan.
What unites all these stories is a belief that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and -- if the right questions are asked -- is even more intriguing than we think. All it takes is a new way of looking. Steven Levitt, through devilishly clever and clear-eyed thinking, shows how to see through all the clutter.
Freakonomics establishes this unconventional premise: If morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But
Freakonomics can provide more than that. It will literally redefine the way we view the modern world.
"
Customer Reviews:
My two cents.......2007-10-08
This collection is the perfect introduction to "thinking outside the box" that Young Adults so desperately need. Filled with challenging situations that demand to know, "why things are the way they are?" Sprinkled with just enough statistics to give credibility, (but not to overwhelm), and just enough history to shed light on the bigger picture; it asks the meaningful, fresh questions that will intrigue and interest the most lethargic student. Recommended for thoughtful, mature audiences, this book may appeal to the Young Adult reader, and their parents. Drugs, crime, getting a job - this book covers many of the contemporary issues facing Young Adults today.
Mind blowing .......2007-10-02
This book changed the way I think about economics, while being entertaining and fun. Highly recommended!
Dumbed Down Levitt.......2007-09-27
I saw Steven Levitt (the economist) on CSPAN Book-TV. He was intelligent, incisive & insightfull and presented his information clearly with a wry sense of humor. I very much anticipated reading this book. What a disappointment! Clearly the book was written by Dubner, not Levitt, and it's origins as a Sunday magazine profile are too apparent. The sharp intelligence and clear ideas are made fuzzy by Dubner's generic, puffy non-fiction writing techniques. This is not to say this book is without merit. Levitt's ideas manage to shine throught the murk of Dubner's writing. But if you want to get a clearer picutre of Levitt and his thinking, go to the C-SPAN Book-TV archives and watch the show with Steven Levitt discussing the book.
I hope that next time Levitt and/or his publisher will have the confidence to have him write a popular, non-academic book on his own and won't feel the need to hire a "professional" to translate his ideas to a popular audience. His ideas need simple clarity, not fancy dressing up.
Spray-Painted Fruit.......2007-09-25
"Freakonomics" has all the elements of great nonfiction. It approaches old subjects in new ways. It combines a "rogue" economist's out-of-the-box thinking with the concise work of a disciplined writer. A quick read, it also challenges Americans to think for themselves--now there's a real accomplishment!
Levitt and Dubner make some interesting points about our education system, medical and parental fears, and racial divides. They never claim to tie all these insights into a cohesive treatise, although they do meander back and forth over unifying themes of what motivates us as human beings and what causes us to buy into collective myths. For years, I've observed the lemming effect in our society, usually driven by the media, and by the average person's seeming inability to override knee-jerk fears with a small dollop of logic. Raising my own children, I heard the flip-flopping of the experts: "Babies should sleep on their backs...their bellies...their sides...in your bed...in their own bed..." ad nauseum.
"Freakonomics" has worthy goals. It reaches them on many levels. On the other hand, it is marketed toward those who already see through these societal deceits. It's not high-minded enough to satisfy those seeking true "rogue" economics, and it's not accessible enough for those nominative readers who might benefit from it the most. Also, on a number of occasions, it draws from a hodgepodge of statistics and extrapolates theories that, while very reasonable, are not proven here with any certainty. And yet we are expected to believe them, even while the same authors are telling us to stop believing such extrapolations from other "experts."
For a book that'll cause you to reconsider certain "established" norms" and to carry on lively discussions, "Freakonomics" is a wonderful coffee table addition. I was disappointed, though, in its overall lack of depth. Most of the subjects addressed are ones I, as a regular individual, have questioned on basic principles of logic in the first place. I didn't need a "rogue" economist for this, or a catchy title. I could've extracted the same tidbits from a decent magazine article by the same pair.
An apple is an apple is an orange. Yes, there are some nutrients in this tasty book, but the authors, like many grocers, have spray-painted the fruit to appear a bit more delectable than it actually is.
This book makes economics entertaining.......2007-09-23
Think you won't be entertained by a book about economics? Think again. Reduced to its essence, economics is about people's response to incentives. This book abounds with examples that you probably aren't accustomed to thinking of as economics. The author excels at analyzing mounds of data and extracting nuggets of wisdom from it. He even steps you through a couple of them, though once he's sure you've got the idea he sticks to giving you the pertinent information. After reading this book I became aware of how economics permeates human interactions.
Amazon.com
Psychology rules the stock market, according to Hersh Shefrin. In Beyond Greed and Fear, Shefrin shows how bias, perception, and other aspects of psychology often rattle investors and move stocks. From the individual who keeps losers too long to overconfident money managers who mistakenly think they can predict financial trends, human nature foils investment returns. "Behavioral finance is everywhere that people make financial decisions. Psychology is hard to escape; it touches every corner of the financial landscape, and it's important. Financial practitioners need to understand the impact that psychology has on them and those around them. Practitioners ignore psychology at their peril," writes Shefrin, a finance professor at Santa Clara University. An academic volume geared toward financial professionals, the book details an emerging field known as behavioral finance, in which psychology is believed to be at least as important as market fundamentals, such as earnings and balance sheets. Shefrin describes how investors are motivated by fear, hope, overconfidence, and the need for short-term gratification. The book gives plenty of examples of investment mistakes, and analyzes them from a behavioral-finance perspective. While Beyond Greed and Fear targets professionals, individual investors will benefit from this look at an important mover of markets. --Dan Ring
Book Description
Even the best Wall Street investors make mistakes. No matter how savvy or experienced, all financial practitioners eventually let bias, overconfidence, and emotion cloud their judgement and misguide their actions. Yet most financial decision-making models fail to factor in these fundamentals of human nature. In Beyond Greed and Fear, the most authoritative guide to what really influences the decision-making process, Hersh Shefrin uses the latest psychological research to help us understand the human behavior that guides stock selection, financial services, and corporate financial strategy. Shefrin argues that financial practitioners must acknowledge and understand behavioral finance--the application of psychology to financial behavior--in order to avoid many of the investment pitfalls caused by human error. Through colorful, often humorous real-world examples, Shefrin points out the common but costly mistakes that money managers, security analysts, financial planners, investment bankers, and corporate leaders make, so that readers gain valuable insights into their own financial decisions and those of their employees, asset managers, and advisors. According to Shefrin, the financial community ignores the psychology of investing at its own peril. Beyond Greed and Fear illuminates behavioral finance for today's investor. It will help practitioners to recognize--and avoid--bias and errors in their decisions, and to modify and improve their overall investment strategies.
Customer Reviews:
Look to market experts for success.......2005-12-21
So long as market investors are human beings rather than machines, market participants will be governed by emotion. The efficient market theory, as Warren Buffett states, works most of the time. But when unusual or exceptional news comes into play, a stock (and/or markets) nearly always overreacts.
The best book I have found on investing is "The Intelligent Investor". There is a clear picture of what works and does not work in investing, and why. There is a fair amount of analysis of the behavior of market participants.
Warren Buffett asserts that he doesn't have much use for what is taught in a typical college business class. As he points out, if professors understand stocks and markets so well, why are so few of them wealthy? People like Ben Graham, Buffett and Peter Lynch are not 'lucky'. They read a great deal, they have keen insight into what makes a stock go up and they are unafraid to buy when prices are low if prospects look good. I would prefer to emulate those who are truly successful rather than those who postulate about what may work.
Selective Presentation of the Evidence.......2005-06-26
I am a behavioral economist with a deep belief in the notion that human decision-makers deviate in important ways from the scientific principles laid down in modern rational choice theory. There is no doubt but that very many investors hold erroneous notions of the dynamics of price movements, and having a correct understanding will, on average lead to better returns on one's portfolio. Sheffrin presents the evidence for this position in an interesting and accessible manner.
Shefrin's main advice for investors is absolutely correct, and would improve the asset positions of many poor souls with idiotic notions of stock dynamics. His advice is that if you are not a gifted and dedicated stock expert, you should invest in a low-maintenance cost array of mutual funds, and above all, do not churn your stocks. It doesn't help to be smart, lucky, a stud with the girls, or blessed by God. Moreover, if you think you have one of the "gifted analysts" for a broker, you are to be counted as among the suckers who are never given an even break.
Shefrin has another thesis which he presents with great verve, but which is on very shakey grounds. This is that "gifted stock analysts" can on average, significantly out-perform the market. He believes this MUST be the case if a significant fraction of investors are behaving irrationality. However, there is another possibility, which is that stock brokers as a group gain from the excessive churning that irrational investors permit or ask them to do, but that it is impossible to "beat the market" except by pure luck or by personally studying firm fundamentals and future prospects.
Shefrin's data in favor of the "gifted analyst" is episodic and anecdotal, and there is plenty of data on the other side. For instance, in Malkiel's classic "Random Walk Down Wall Street", he relates the evidence that chimps throwing darts do as well as major brokerage houses. Sheffrin presents contrary evidence for a more recent period in which "gifted experts" outperform the random darts. New evidence, collected by Money magazine, shows that a group of experts did far worse than the darts in 2003. All of this evidence is spotty and anecdotal. The plural of anecdote is not data.
I am not convinced by this book that the efficient markets hypothesis, applied to final returns to investors (after payments to stock brokers and other transactions costs), is not correct. I think the author makes a mistake taking so strong a position when the evidence is so weak on this account. I am certainly not convinced that Malkiel's analysis is in any way overturned by new evidence.
However, if Shefrin convinces a few investors to act more sanely, he will have fulfilled an important social function.
Packed with Knowledge ! .......2005-02-23
If only you could bring yourself to ditch those losers from your portfolio, and hang onto your winners. If you can, you are unusual. Unprofitable habits afflict nearly all investors, beginners and pros alike, writes Hersh Shefrin in this intriguing study of the role of emotions in investing. Shefrin balances the jargon with plenty of real-world examples and wisely cautions you not to delude yourself into thinking that his tips will make you rich. Viewing investing through the prism of behavior finance, he analyzes emotionally-laden decisions made by private investors, money managers, bankers and other professionals handling stocks and various other forms of investments including options, foreign currency and futures. Shefrin offers juicy case histories, so his tour of behavioral finance is mostly enjoyable and useful. At times, though, the book bogs down in the author's attempts to legitimize behavior finance, a relatively new school of thought. For instance, he charges failed investors with committing "heuristic bias" or falling prey to "representativeness." That quibble aside, we recommend this intriguing tome to investment decision makers on any level. Whether you are running billions or managing a retirement account (which, as Shefrin notes, most people do badly), maybe this book will buffer you against emotional investing and pocketbook pain.
Comprehensive, Entertaining Overview of Fascinating Field .......2004-12-25
Wondering what Brealy & Myers or Sharpe left out? Don't expect your broker (or fund manager, excepting Richard Thaler) to fill you in. This book is a must read for any active (or passive) participant in the markets, or any other citizen who is affected by said markets. Meaning all of us.
Shefrin provides a masterful exposition of the application of cutting-edge cognitive psychology to the behavior of retail and institutional investors, analysts, mutual fund managers, CEO's and even heavily-advised university investment committees. The result is the theoretical demolition of the efficient markets hypothesis in even its weakest form, and the related CAPM(s), catching up to their long-noted empirical failings. As it turns out the market does have a memory, and that's not just an anomaly any more. Not every trade is zero-NPV: trust the market price at your own peril. Think dividends are irrelevant? Think again.
What we're left with is a fascinating account of how market participants actually behave: holding on to losers too long, trading too much and trading on "noise," and most alarmingly, undersaving for retirement. What is significant is that these phenomena are so prevalent that they can no longer be dismissed as irrational with the hope that "more sophisticated" money will magically correct the market. To the contrary, what Shefrin describes is proved to be the psychological norm; if you believe you're different, you're either very lucky or overconfident about your lack of overconfidence.
One quibble, in an area that I have looked at before, is in Shefrin's discussion of takeovers. First, I found a bit of confusion between the question of whether the takeover premium should be tested by reference to the post-announcement combined value of both firms, or just the buyer. Since the buyer's CEO is initially fiduciary for just his shareholders, I see only the latter as relevant.
More significantly, Shefrin does not provide any means to rigorously discriminate among his hubris hypothesis and other, more rationalistic theories, such as agency costs and private benefits. And his brief treatment omits many puzzling follow-up questions: if CEO psychology has the potential to systematically destroy shareholder wealth, what should we then conclude about the investors and analysts who allow them to get away with it? Just a governance problem, or is there yet another psychological story to be told?
But the desire to delve further into the subject is just indicative of Shefrin's compelling and readable narrative. For bottom line types, I'm afraid the answer to your question is no, he doesn't explain how to get rich. But you'll surely do alot better with a single yellowing copy of Graham & Dodd than all the reams of abstruse, dogmatic journal articles ever spewed by the Chicago School.
A very good book, but quite academic.......2003-04-29
I had mixed feeling about this book. Content wise, it's incredible. It's full of real life stories, data, analyses, propositions of many so called market anomalies. However, I really find some of the chapters too long, especially those after chapter 5. The author had copied his style of thesis writing and actually many of his own theses (he's a renowed professor after all) into a book which has a big audience group of investors or traders who want quick fix or certain level of entertainment and personal improvement. In these respects, the "Psychology of Finance by Lars Tvede" and the "Devil take the hindmost by Edward Chancellor" are "easier" but not definitely better alternatives.
Anway, this is one of the very few "serious" books about behavioural finance that is relatively practical. If you are abound of time, go for it. Otherwise, you may try the two books I mentioned above.
p.s. I like the following the most: In April 1997 Financial Times ran a contest suggested by economist Richard Thaler. Readers were told to choose a whole number between 0 and 100. The winning entry would be the one closest to two thirds of the average entry. The winning choice is 13. The real point of this game is that playing sensibly requires you to have a sense of the magnitude of the other players' errors. Hope you got it right.
Average customer rating:
- It's so Great
- Excellent book!
- Sizing and Speaking
- If you only buy one book on personality type, this should be it
- Changed my way of seeing people!
|
The Art of Speed Reading People: How to Size People Up and Speak Their Language
Paul D. Tieger , and
Barbara Barron-Tieger
Manufacturer: Little, Brown and Company
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ASIN: 0316845183 |
Amazon.com
Do you communicate ineffectively with some people and powerfully with others? The reason may be a difference in personalities and communication preferences. The Art of Speedreading People is a crash course in communication strategies, showing you how to observe behavioral clues to gain valuable insights into people's personalities and communication styles. The result: you become a more effective and convincing communicator, and you are more likely to receive the response you want.
This book is like a practical communications seminar based on the psychology model called Personality Typing, which is focused on identifying key personality traits in order to communicate most effectively. First, you analyze your own personality type and determine your placement on the scales of extrovert/introvert, sensor/intuitive, thinking/feeling, and judging/perceiving. The book then teaches you about the clues that indicate other people's personality type, including speaking style, body language, and occupation. You test yourself by reading a few scenarios and personality typing the characters described. You put the system to work by learning approaches to "speedreading" people in person and on the phone using skill-building exercises. Finally, you learn how to communicate effectively with people who are a different type or temperament than you. The Art of Speedreading People is intriguing and useful, especially for those who work in a sales, service, teaching, or managerial position, or any job where effective and positive communication is paramount.
Book Description
Do you communicate ineffectively with some people and powerfully with others? The reason may be a difference in personalities and communication preferences. The Art of Speedreading People is a crash course in communication strategies, showing you how to observe behavioral clues to gain valuable insights into people's personalities and communication styles. The result: you become a more effective and convincing communicator, and you are more likely to receive the response you want. This book is like a practical communications seminar based on the psychology model called Personality Typing, which is focused on identifying key personality traits in order to communicate most effectively. First, you analyze your own personality type and determine your placement on the scales of extrovert/introvert, sensor/intuitive, thinking/feeling, and judging/perceiving. The book then teaches you about the clues that indicate other people's personality type, including speaking style, body language, and occupation. You test yourself by reading a few scenarios and personality typing the characters described. You put the system to work by learning approaches to "speedreading" people in person and on the phone using skill-building exercises. Finally, you learn how to communicate effectively with people who are a different type or temperament than you. The Art of Speedreading People is intriguing and useful, especially for those who work in a sales, service, teaching, or managerial position, or any job where effective and positive communication is paramount.
Customer Reviews:
It's so Great.......2007-06-28
wow this book gives us the best of solution to understand and identify the personality of others. I recommend it!
Excellent book!.......2007-05-15
Wow, what an eye-opener this book is! I really enjoyed reading this book about human personality and strongly recommend it to everyone. The book compares different personality traits and guides the reader to effectively and efficaciously interact with people regardless of their trait. Wish I'd read this book in high school!
Sizing and Speaking.......2007-04-12
This is a great book for anyone who deals with people. This has plenty of applications in your personal and professional life.
Highly recommend this book.
If you only buy one book on personality type, this should be it.......2006-05-11
I took the Myers Briggs personality test and learned a bit about personality type in communication and psych classes in college. But I wanted to know more. I wondered how I could figure out the personality types of others and use this information to help understand and communicate with others. I came across this book on Amazon and I think I purchased it because of all the great reviews. So I thought I should contribute a great review too. If you only buy one book on personality type I recommend this one. It's a great intro to type and it's very easy to understand. I refer back to it all the time. I also recommend "Just Your Type : Create the Relationship You've Always Wanted Using the Secrets of Personality Type" by the same authors, which matches all 16 personality types with each other, explains how type affects couple's interactions and suggests potential sources of conflict. Also very interesting. I would definitely purchase other books by these authors.
Changed my way of seeing people!.......2005-09-10
This book has changed my life. It is amazing how much I learned about myself. Now I understand my wife and other people, and I don't judge them anymore. My relations to others is now easear and less stressfull. Thanks!
Amazon.com
Why do so many otherwise rational individuals make irrational decisions when it comes to money? Financial journalist Gary Belsky and Cornell University psychology professor Thomas Gilovich contend the answers can be found--and the deficiencies remedied--with help from a relatively new science called behavioral economics. Still largely unknown outside academic circles, the field can be traced to research on the impact of rewards and punishments on human judgment and decision- making that first were undertaken at Jerusalem's Hebrew University some 30 years ago. In Why Smart People Make Big Money Mistakes , Belsky and Gilovich update this pioneering work and show readers how to understand exactly why they invest, spend, and save as they do. More importantly, using examples that everyone can identify with and language that anyone can understand, the authors offer dozens of workable suggestions that can help readers manage their money better. "We believe that by identifying the psychological causes behind many types of financial decisions," they write, "you can effectively change your behavior in ways that will ultimately put more money in your pocket and help you keep more of what you already have." --Howard Rothman
Book Description
Why do so many otherwise smart people make foolish financial choices? Why do investors sell stocks just before they skyrocket -- and cling to others as they plummer? Why do shoppers overspend when using credit cards rather than cash? What do our habits of tipping or buying lottery tickets indicate about our relationship with money?
In this fascinating investigation of the ways we spend, invest, save, borrow, and waste money, Gary Belsky and Thomas Gilovich reveal the psychological causes -- the patterns of thinking and decision making -- of irrational behavior. Most important, they focus on the decisions we make every day and, using entertaining examples, provide invaluable tips on avoiding the financial faux pas that can cost thousands of dollars each year.
Download Description
Why do so many otherwise smart people make foolish financial choices? Why do investors sell stocks just before they sky rocket -- and cling to others as they plummet? Why do shoppers overspend when using credit cards rather than cash? What do our habits of tipping or buying lottery tickets indicate about our relationship with money? In this fascinating investigation of the ways we spend, invest, save, borrow, and waste money, Gary, Belsky and Thomas Gilovich reveal the psychological causes -- the patterns of thinking and decision-making -- that result in irrational behavior. Most importantly they focus on the decisions we make everyday and, using entertaining examples, provide invaluable tips on avoiding the financial faux pas that can cost thousands of dollars each year.
Customer Reviews:
Great Introduction to Behavioral Finance.......2007-07-21
For more than 20 years I have been fascinated why so many people make financial decisions which defy rationality. Unfortunately, I find it extremely difficult to read and comprehend most of the research papers that has been done in the field of behavioral finance. The last 5 years have seen several good books explaining the results of the emerging field of behavioral finance. This book is one of those good books.
As a fan of index funds, I enjoyed reading this book's explanation and recommendation for suggesting index funds.
This book is very readable and is an excellent primer on the major concepts which are emerging from behavioral finance research.
Socrates was right when he uttered his famous quote "Know Thy Self". One of the hardest things to do is to understand why we do what we do sometimes. This book helps explain some of this natural human behavior, and how we can manage it to make more rational financial decisions.
I would suggest companion books to supplement this book including:
Index Mutual Funds: How to Simplify Your Financial Life and Beat the Pro's
How to Use Psychology to Achieve Your Financial Goals
Are You Using the Right Rules to Plan Your Retirement?
The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
Entertaining and good stuff.......2007-07-03
The book is easy to read and it also covers a lot of interesting topics. Highly recommended.
One of my favorite personal finance books.......2007-05-15
It's been years since I first read this book, but I still reference it often when talking about money decisions. It's readable, fun, and informative. I also enjoy the situational questions that begin each chapter. Even when you can see what point they're getting it, it's easy to see yourself making the same mistake in a moment of decision.
Out of the ivory tower and into your real life.......2007-01-09
this book is an easy well-written guide to understanding the academic field of behavioral economics and to bring it into the real world of our lives. The original research studies are really dry and hard to read even for a psychologist (I am one).....this is reader friendly and practical. Helped me understand some of the errors I made and still fall into....like noticing the stocks I have really done well with and forgetting about the ones that did not do so well so I think I have done really well in the market the past year..but then I look at the cold hard numbers and guess what? I did not do nearly as well I thought. Very helpful to use with patients who are having credit card woes (future dollars are so cheap). Dr. Mary Gresham Atlanta Ga
Are you mentally fit to make money decisions?.......2006-12-21
This book helps to show you some of the common pitfalls that people make when making decisions involving money. While there are topics related to investing, there are also general "money-decision" topics. There were actually some mistakes that I did not even think of but when I read them I realized that many of my friends made these mistakes. For me the biggest lesson that I learned was the part about mental accounting. This is one of those books that you think is all common sense but when you think about it, you realize that you too make these mistakes.
Book Description
Praise for The Three Skills of Top Trading
"Professor Pruden's new book, The Three Skills of Top Trading, is unquestionably the best book on a specific trading method and the necessary attributes for trading that I have read. His logic, understanding of human foibles, and use of the Wyckoff method of trading are broadly referenced, readable, understandable, and entertaining."
- Charles D. Kirkpatrick, II, CMT, coauthor of
Technical Analysis: The Complete Resource for Financial Market Technicians, Editor of the Journal of Technical Analysis, and board member of the Market Technicians Association
"At long last, someone has taken the time and effort to bring the work and insight of Wyckoff to wider public attention-and Hank Pruden has done so masterfully, with great clarity and eloquence. Hank has taken the best of Wyckoff's work, combining it with the essential aspects of trader discipline and psychology, to provide a highly readable and particularly useful guide to trading. MUST READING!"
- Jacob Bernstein, www.trade-futures.com
"Hank Pruden puts all of the elements needed for successful trading into one volume. This book not only belongs on every trader's shelf but should be close enough for continuous reference."
- Martin J. Pring, President, www.Pring.com
"Dr. Pruden has brought together his lifetime of work in developing a modern approach to analyzing and trading the markets built upon classic market analysis from the early part of the twentieth century and topped off with modern-day tenets of behavioral finance and mental state management."
- Thom Hartle, Director of Marketing for CQG, Inc. (www.cqg.com)
"I usually consider a book to be well worth reading if it gives me one paradigm shift. I believe that this book will give the average investor a lot more than just one."
- Van K. Tharp, PhD, President, Van Tharp Institute
Book Description
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
Customer Reviews:
Best introductory book on behavioral finance.......2007-01-05
As has been admitted by even the staunchest former proponents of financial economics (such as Burton Malkiel), the multi-decades old dominant intellectual field in academic finance has piled up against itself persistent anomalous data. Thus, it is no surprise, as the science of economics advanced, that a new intellectual field would develop to challenge and replace the old. Behavioral finance, which relaxes some of the key assumptions in financial economics, utilizes survey data, and integrates knowledge from psychology to better understand financial markets, is that new intellectual field.
Although still controversial, young economists and financial professionals should become versed in this new field as early as possible: 1) because there is huge room for new research where creative economists can flex their muscle and 2) financial professionals that drop the old adherence to financial economics will have an edge over those that don't. Andrei Shleifer's work is the best introductory work on behavioral finance that I've come across, and I thus strongly recommend it to those who want a quick and easy to understand introduction to this field which is the wave of the future of academic finance (well, I hope).
Robert Stephenson-Padron
MSc student (economics & finance)
University of Navarra, Spain
Arguments Against the Efficient Market Hypothesis.......2005-01-15
Inefficient Markets by Harvard economist Andrei Shleifer provides a strong argument against the Efficient Market Hypothesis (EMH) in its various forms and an introduction to Behavioral Finance. Shleifer's main points are summarized below.
1. The EMH comes in three forms. The Weak Form states that an investor can not achieve returns above the market averages based on the analysis of historical stock price patterns (Technical Analysis). The Semi-Strong Form states that all publicly available news is reflected in stock prices almost instantaneously and that an investor can not beat the market averages by diligently tracking company earnings and other events (Fundamental Analysis). Finally, the Strong Form says that an investor can not beat the market even by using information that is not available to the public (Insider Trading). The Strong Form can be dismissed by considering the number of corporate executives currently under indictment or serving time for insider trading. Evidence against the Semi-Strong and Weak Forms can be found in the Small Stock Effect (small stocks outperform the market) and January Effect (the market does best in January) which seemed to hold until they were widely publicized but have presumably been negated since then by arbitrage. Additional evidence against the EMH can be found in the less than perfect correlation between the price movements of Royal Dutch and Shell Transport and Trading shares which jointly own the Royal Dutch Shell enterprise in a fixed 60%/40% ratio. Furthermore, the prevalence of a 10% to 20% discount in the share price of closed end funds relative to their net asset values suggests that the market is less than efficient.
2. In Chapters 2-4, Shleifer demonstrates the limits of arbitrage in maintaining efficient markets. He develops a mathematical model for predicting the returns of arbitrageurs (who accurately perceive the values of stocks) and noise traders (who incorrectly perceive the same values). His Noise Trader Model explains how noise traders can sometimes achieve higher returns than arbitrageurs based on the "hold more" and "create space" effects. The "hold more" effect is based on the community of noise traders egging each other on as was seen in the technology bubble that burst in 2000. The "create space" effect says that the wider the range of incorrect perceptions held by noise traders, the less effective arbitrageurs will be in bring stock prices back to their correct values. Shleifer uses the Noise Trader Model to make additional predictions about the market behavior of closed end funds and shows that, unlike the EMH, it accurately models such phenomena as the rise in share price to the underlying net asset value upon liquidation or reorganization as an open end fund. Finally, he shows that professional arbitrageurs, such as hedge fund operators, are forced to adopt more conservative tactics than individual arbitrageurs by their need to retain clients and funding.
3. In Chapters 5 and 6, Shleifer develops a model of Investor Sentiment based on investors' patterns of psychological underreaction and overreaction. Investors tend to underreact to new information (such as reported earnings) by modifying their perception of a stock's value by less that the new information would suggest and continuing to extrapolate the old stock price trend. If confronted with repeated inputs of new information that consistently points in the same direction, investors tend to overreact by discarding the old model, accepting the recent trend as the new model, and extrapolating it into the future. Finally, he shows how investor sentiments can form a positive feedback trading environment in which arbitrage can actually destabilize the market.
This is a book for serious students of finance. It's not a "Behavioral Finance for Dummies". However, the math does not require more than a year of calculus and a good understanding of calculus-based probability and statistics. Shleifer's writing style is remarkably clear for an academic economist (many of whom I find able to obfuscate the simplest concepts). Overall, Inefficient Markets is a long-overdue reexamination of the theoretical underpinnings of modern finance theory.
Some of Roseblatt's comments are wrong.......2004-12-25
Beneath my comments, writes Roseblatt:
=====================
In chapter 4, he is concerned with the 'limits of arbitrage' (the original title of this paper, published in the JOF in 1997). This paper is definitely worth reading to understand the problems with hedge funds and other arbitrageurs. However, linking the limits of arbitrageurs to 'inefficiency of the market' is erroneous. The very fact that arbitrageurs can not take advantage of what they think are mispriced assets, due to collateral constraints (Schleifer's hypothesis), shows that the market is efficient, since no free money is floating around.
=============================
No, with the 'limits of arbitrage', the mispricing cannot be corrected quickly. The logic lies like this: suppose A sees the arbitrage opportunity, but due to the "limit", he can only trade certain shares, and makes $10 FREE MONEY. He knows there is still another $10 "on the table", but he cannot take action anymore. At this point, if no one else sees this arbitrage opportunity, the market remains inefficient until another arbitrageir B jumps in and remove that "remaining $10 on the table". Of course A and B made "free money". Shleifer's treatment is perfectly Okay. Roseblatt's rebuttal is illogic and obviously wrong.
However, EMH itself is a hoax. It is not scientific at all. I believe in the early days, financial economics was dominated by people who had little quantitative or science training, therefore, they could only do something like EMH sort of soft libral arts type of research. To me, it is not EMH, it is how quickly the information gets reflected in stock prices; and how big is the limit of arbitrage. Nothing else. I suggest the new generation of high-level finance researchers should totally discard this spurious EMH topic. Period.
A good intro to Behavioral Finance.......2003-05-29
Markets are not efficient in part because Investor Sentiment is a strong factor creating momentum (either upward or downward trend, whether sentiment is positive or negative). Also, arbitrage is very weak, as there are no proper securities substitutes, shorting the indexes is too risky. The "Noise Trader Risk" is too great. Meaning equity values may continue to diverge long enough for the arbitrageurs to loose their shirt betting on convergence. The investor type is a very important characteristic to factor. This explains the close end fund puzzle. The discount on closed end fund tracks the fate of small cap stocks. When small cap stocks do poorly, the discount on closed end funds deepens. This is because both investments are dominated by the same type of investors: individuals - small investors. Thus, both investment types are subject to small investors' sentiments.
Too much maths but interesting interpretation.......2002-09-11
There is too much maths in the book. However, the comments and interpretation on various models are very interesting. The authour distinguish between arbitrageurs and noise traders. He also give us a theory of substituability which is interesting but inapplicable in reality. Too much theory also with a lot of hypothesis that are not respected in real markets.
I was looking more for a book on investment psychology and I was disappointed.
Book Description
Twenty years ago, behavioral economics did not exist as a field. Most economists were deeply skeptical--even antagonistic--toward the idea of importing insights from psychology into their field. Today, behavioral economics has become virtually mainstream. It is well represented in prominent journals and top economics departments, and behavioral economists, including several contributors to this volume, have garnered some of the most prestigious awards in the profession.
This book assembles the most important papers on behavioral economics published since around 1990. Among the 25 articles are many that update and extend earlier foundational contributions, as well as cutting-edge papers that break new theoretical and empirical ground.
Advances in Behavioral Economics will serve as the definitive one-volume resource for those who want to familiarize themselves with the new field or keep up-to-date with the latest developments. It will not only be a core text for students, but will be consulted widely by professional economists, as well as psychologists and social scientists with an interest in how behavioral insights are being applied in economics.
The articles, which follow Colin Camerer and George Loewenstein's introduction, are by the editors, George A. Akerlof, Linda Babcock, Shlomo Benartzi, Vincent P. Crawford, Peter Diamond, Ernst Fehr, Robert H. Frank, Shane Frederick, Simon Gächter, David Genesove, Itzhak Gilboa, Uri Gneezy, Robert M. Hutchens, Daniel Kahneman, Jack L. Knetsch, David Laibson, Christopher Mayer, Terrance Odean, Ted O'Donoghue, Aldo Rustichini, David Schmeidler, Klaus M. Schmidt, Eldar Shafir, Hersh M. Shefrin, Chris Starmer, Richard H. Thaler, Amos Tversky, and Janet L. Yellen.
Customer Reviews:
Very good book.......2005-09-24
This book offers a deep and complete analysis of the so called "Behavioral economics". It covers many of the topics (loss avversion, prospect theory, behavioral finance, ecc. ecc.) of this new science and it never tries to gives a "definitive" answer to all these problems but just to give to the reader new instruments to understand the economic reality. In this way it respects, as it should be done, the character of "working in progress" of this science
However, as the title itself suggest -Andances in Behavioral economics-, in order to read many of the papers it's necessarly to have a kind of economical background (games theory, and so on...)
Book Description
Game theory, the formalized study of strategy, began in the 1940s by asking how emotionless geniuses should play games, but ignored until recently how average people with emotions and limited foresight actually play games. This book marks the first substantial and authoritative effort to close this gap. Colin Camerer, one of the field's leading figures, uses psychological principles and hundreds of experiments to develop mathematical theories of reciprocity, limited strategizing, and learning, which help predict what real people and companies do in strategic situations. Unifying a wealth of information from ongoing studies in strategic behavior, he takes the experimental science of behavioral economics a major step forward. He does so in lucid, friendly prose.
Behavioral game theory has three ingredients that come clearly into focus in this book: mathematical theories of how moral obligation and vengeance affect the way people bargain and trust each other; a theory of how limits in the brain constrain the number of steps of "I think he thinks . . ." reasoning people naturally do; and a theory of how people learn from experience to make better strategic decisions. Strategic interactions that can be explained by behavioral game theory include bargaining, games of bluffing as in sports and poker, strikes, how conventions help coordinate a joint activity, price competition and patent races, and building up reputations for trustworthiness or ruthlessness in business or life.
While there are many books on standard game theory that address the way ideally rational actors operate, Behavioral Game Theory stands alone in blending experimental evidence and psychology in a mathematical theory of normal strategic behavior. It is must reading for anyone who seeks a more complete understanding of strategic thinking, from professional economists to scholars and students of economics, management studies, psychology, political science, anthropology, and biology.
Book Description
Richard Thaler challenges the received economic wisdom by revealing many of the paradoxes that abound even in the most painstakingly constructed transactions. He presents literate, challenging, and often funny examples of such anomalies as why the winners at auctions are often the real losers--they pay too much and suffer the "winner's curse"--why gamblers bet on long shots at the end of a losing day, why shoppers will save on one appliance only to pass up the identical savings on another, and why sports fans who wouldn't pay more than $200 for a Super Bowl ticket wouldn't sell one they own for less than $400. He also demonstrates that markets do not always operate with the traplike efficiency we impute to them.
Customer Reviews:
Very interesting.......2006-09-22
It gives you a great overview of some of the strange inconsitencies in human behavior. It is more than just a finance book and has many interesting stories that you can talk about with friends later.
Behavioral economics for the real world........2006-02-11
The "Winners Curse" is a book about behavioral economics. It applies experimental human psychological studies to economic behavior. It consists of 14 chapters, each devoted to a different "anomaly" in economic behavior. The term anomaly is used by the author to denote behavior that runs counter to the assumptions of most theoretical economic models, which assume that people act in a rational and greedy manner. To me (not an economist), that anyone would base a theory on the assumptions of rational human behavior and that people are always greedy (seeking the maximum economic gain) is a bit irrational. It does not come as a surprise to me that people act irrationally and that they can sometimes act for the common good, instead of seeking maximum personal gain.
Each chapter starts with a brief hypothetical problem. Some are based on real problems, (such as playing the lottery, betting on horses, the calendar effect on stock market prices, foreign currency exchange problems, ...) or based on model games, (such as bargaining games, games where cooperation is required, auction games,....). The results of these experimental games and the statistical data on human behavior in real situations (such as stock market purchases) are then compared to the predictions of the theoretical models that assume rationality and greed. The point of the book is that it can be experimentally shown that people act irrationally (from an economic perspective) and can act in a manner that does not seek the maximum personal gain. The author does not believe that this spells the end for theoretical economic modeling, only that more psychological input is required.
This book is interesting, but in my opinion it is neither fish nor fowl. I do not think that it is rigorous enough to satisfy an economist, but is somewhat too complicated in spots for general readers. After the general statement of the problem there is a discussion of the experimental data that bears on the problem. This discussion can be hard for a non-economist (me) to follow at times. That said, I enjoyed book and got a lot of interesting information from it. I learned why it is sometimes a good deal (yielding a positive expected value) to play the lottery and what the most commonly chosen numbers are. The author also points out that this does not mean that you will win, only that if you and your descendants played at the correct times for a thousand years or so, you would eventually make more than what you would spend on tickets. In some situations it is thus favorable to buy tickets covering all the possible combinations, but you would need millions of dollars and a way to physically buy millions of tickets. I learned the best days to buy or sell a stock (at least statistically on which days the market tends to go up and on which it tends to go down).
By the way, the Winners Curse refers to the winner of an auction being cursed because the price paid was too high. I learned that with many bidders it is best to lower the maximum price that you are willing to pay. Unfortunately, doing this means that you will seldom get the item, but when you do succeed you will not be cursed by paying too much.
All in all, stick with it. If necessary, skip over some of the discussion of the experimental data and go to the concluding remarks for each chapter. I found it to be worth the effort.
Highly Recommended!.......2005-07-15
We highly recommend this classic of economic literature, one of the first (more or less) accessible presentations of the evidence against economic rationality. Economists have assumed, conventionally, that economic choice rests on a foundation of rationality. For instance, economists tend to think that people will put the same value on two mathematically identical offers. Yet laboratory experiments have proven what everyday experience suggests: people are not quite rational. Author Richard H. Thaler, a founding father of behavioral economics, presents convincing exhibits to make the case that the assumption of economic rationality is an awfully big pill to swallow. Stylistically, his book strikes a neat balance between accessibility and obscurity. A reader will need a certain amount of schooling in economics and a great deal of patience with academic prose to wade through every word of every chapter, although the payoff is substantial. However, it is possible for the impatient reader to get the gist by reading the introduction, the first page or two of each chapter and the epilogue. And even that is eminently worthwhile.
by an economist, for an economist.......2004-05-09
as an amateur economist grown increasingly dissatisfied w/ the failures of available theories, i was hopeful that this book would expound more on why markets fail. in some ways it did (in a very drab and boring language), although its coverage of financial markets (my interest) was all too brief and incomplete---the coverage of losers' outperformance of winners in equities was by far (IMHO) the best section of the book, but as good as that section was, the coverage of foreign exchange fluctuations was a failure. ---soros did a much better job of this.
there is some good material in this book, and i would give it 3 stars as a result, but the writing style makes it simply too inaccessible for the average reader. better financial market focus can be found in "reminisces of a stock operator" and "alchemy of finance", which really were accidental breakthroughs in behavioral finance (particularly the former--a gem of a book).
rhyno
Intriguing for the academic mind.......2004-04-12
Most anyone will find this discussion of Thaler's (and his colleagues) work enough to whet their appetite for more on the subject. It is only a matter of time before you will find yourself digging up the academic papers behind the discussions. My only complaint: the supporting books by Kahneman and Tversky are expensive!
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- Architectural Graphic Standards, Tenth Edition (Book only)
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Books Index
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Advances in Behavioral Finance
Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing (Financial Management Association Survey and Synthesis Series)
Advances in Behavioral Economics (The Roundtable Series in Behavioral Economics)
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