Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance PDF
Preview Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance
Table of Contents Title Page Copyright Page Dedication Preface I Common Mistakes and Basic Biases II The Professionals and the Biases III The Seven Sins of Fund Management IV An Investment Process as a Behaviour Defence V Bubbles and Behaviour VI Investment Myth Busters VII Corporate Governance and Ethics VIII Happiness Acknowledgements SECTION I - Common Mistakes and Basic Biases Chapter 1 - Emotion, Neuroscience and Investing: Investors s Dopamine Addicts SPOCK OR McCOY? THE PRIMACY OF EMOTION SELF-CONTROL IS LIKE A MUSCLE HARD-WIRED FOR THE SHORT TERM HARD-WIRED TO HERD PLASTICITY AS SALVATION Chapter 2 - Part Man, Part Monkey THE BIASES WE FACE BIAS #1: I KNOW BETTER, BECAUSE I KNOW MORE BIAS #2: BIG ≠ IMPORTANT BIAS #3: SHOW ME WHAT I WANT TO SEE BIAS #4: HEADS WAS SKILL, TAILS WAS BAD LUCK BIAS #5: I KNEW IT ALL ALONG BIAS #6: THE IRRELEVANT HAS VALUE AS INPUT BIAS #7: I CAN MAKE A JUDGEMENT BASED ON WHAT IT LOOKS LIKE BIAS #8: THAT’S NOT THE WAY I REMEMBER IT BIAS #9: IF YOU TELL ME IT IS SO, IT MUST BE TRUE BIAS #10: A LOSS ISN’T A LOSS UNTIL I TAKE IT CONCLUSIONS Chapter 3 - Take a Walk on the Wild Side IMPACT BIAS EMPATHY GAPS COMBATING THE BIASES Chapter 4 - Brain Damage, Addicts and Pigeons Chapter 5 - What do Secretaries’ Dustbins and the Da Vinci Code have in Common? Chapter 6 - The Limits to Learning SELF-ATTRIBUTION BIAS: HEADS IS SKILL, TAILS IS BAD LUCK HINDSIGHT BIAS: I KNEW IT ALL ALONG SKINNER’S PIGEONS ILLUSION OF CONTROL FEEDBACK DISTORTION CONCLUSIONS SECTION II - The Professionals and the Biases Chapter 7 - Behaving Badly THE TEST THE RESULTS OVEROPTIMISM CONFIRMATORY BIAS REPRESENTATIVENESS THE COGNITIVE REFLECTION TASK (CRT) ANCHORING KEYNES’S BEAUTY CONTEST MONTY HALL PROBLEM CONCLUSIONS SECTION III - The Seven Sins of Fund Management Chapter 8 - A Behavioural Critique SIN CITY ALTERNATIVE APPROACHES AND FUTURE DIRECTIONS Chapter 9 - The Folly of Forecasting: Ignore all Economists, Strategists, & Analysts OVERCONFIDENCE AS A DRIVER OF POOR FORECASTING OVERCONFIDENCE AND EXPERTS WHY FORECAST WHEN THE EVIDENCE SHOWS YOU CAN’T? WHY USE FORECASTS? DEBASING Chapter 10 - What Value Analysts? Chapter 11 - The Illusion of Knowledge or Is More Information Better Information? Chapter 12 - Why Waste Your Time Listening to Company Management? MANAGERS ARE JUST AS BIASED AS THE REST OF US CONFIRMATORY BIAS AND BIASED ASSIMILATION OBEDIENCE TO AUTHORITY TRUTH OR LIE? CONCLUSIONS Chapter 13 - Who’s a Pretty Boy Then? Or Beauty Contests, Rationality and ... BACKGROUND THE GAME THE SOLUTION THE RESULTS A SIMPLE MODEL OF OUR CONTEST COMPARISON WITH OTHER EXPERIMENTS LEARNING CONCLUSIONS Chapter 14 - ADHD, Time Horizons and Underperformance Chapter 15 - The Story is the Thing (or The Allure of Growth) Chapter 16 - Scepticism is Rare (or Descartes vs Spinoza) CARTESIAN SYSTEMS SPINOZAN SYSTEMS LIBRARIES A TESTING STRUCTURE THE EMPIRICAL EVIDENCE STRATEGIES TO COUNTERACT NAÏVE BELIEF Chapter 17 - Are Two Heads Better Than One? BEATING THE BIASES SECTION IV - Investment Process as Behavioural Defence Chapter 18 - The Tao of Investing Chapter 19 - Come Out of the Closet (or, Show Me the Alpha) THE ALPHA THE EVOLUTION OF THE MUTUAL FUND INDUSTRY CHARACTERISTICS OF THE FUNDS CONCLUSIONS Chapter 20 - Strange Brew THE LONG RUN THE SHORT RUN BREAK THE LONG-ONLY CONSTRAINT ADD BREADTH NOT JUST AN EXCUSE FOR HEDGE FUNDS TRULY ALTERNATIVE INVESTMENTS CONCLUSIONS Chapter 21 - Contrarian or Conformist? Chapter 22 - Painting by Numbers: An Ode to Quant NEUROSIS OR PSYCHOSIS? BRAIN DAMAGE DETECTION UNIVERSITY ADMISSIONS CRIMINAL RECIDIVISM BORDEAUX WINE PURCHASING MANAGERS META-ANALYSIS THE GOOD NEWS SO WHY NOT QUANT? Chapter 23 - The Perfect Value Investor TRAIT I: HIGH CONCENTRATION IN PORTFOLIOS TRAIT II: THEY DON’T NEED TO KNOW EVERYTHING, AND DON’T GET CAUGHT IN THE NOISE TRAIT III: A WILLINGNESS TO HOLD CASH TRAIT IV: LONG TIME HORIZONS TRAIT V: AN ACCEPTANCE OF BAD YEARS TRAIT VI: PREPARED TO CLOSE FUNDS Chapter 24 - A Blast from the Past THE UNHEEDED WORDS OF KEYNES AND GRAHAM Chapter 25 - Why Not Value? The Behavioural Stumbling Blocks KNOWLEDGE ≠ BEHAVIOUR LOSS AVERSION DELAYED GRATIFICATION AND HARD-WIRING FOR THE SHORT TERM SOCIAL PAIN AND THE HERDING HABIT POOR STORIES OVERCONFIDENCE FUN NO, HONESTLY I WILL BE GOOD Chapter 26 - Bargain Hunter (or It Offers Me Protection) THE METHODOLOGY DOES VALUE WORK? THE ANATOMY OF VALUE THE SIREN OF GROWTH GROWTH DOESN’T MEAN IGNORING VALUATION THE DISAPPOINTING REALITY OF GROWTH ANALYST ACCURACY? VALUE VERSUS GROWTH KEY POINTS REGIONAL TABLES Chapter 27 - Better Value (or The Dean Was Right!) Chapter 28 - The Little Note that Beats the Markets THE METHODOLOGY AND THE DATA THE RESULTS QUALITY MATTERS FOR VALUE CAREER DEFENCE AS AN INVESTMENT STRATEGY WHAT ABOUT THE LONG/SHORT VIEW? THE FUTURE FOR THE LITTLE BOOK TABLES AND FIGURES Chapter 29 - Improving Returns Using Inside Information PATIENCE IS A VIRTUE USING INSIDE INFORMATION A HEDGE PERSPECTIVE RISK OR MISPRICING? EVIDENCE FOR BEHAVIOURAL ERRORS EVIDENCE AGAINST THE RISK VIEW EUROPEAN EVIDENCE CONCLUSIONS Chapter 30 - Just a Little Patience: Part I Chapter 31 - Just a Little Patience: Part II VALUE PERSPECTIVE GROWTH PERSPECTIVE GROWTH AND MOMENTUM VALUE FOR GROWTH INVESTORS VALUE AND MOMENTUM IMPLICATIONS Chapter 32 - Sectors, Value and Momentum VALUE MOMENTUM SECTORS: VALUE OR GROWTH STOCKS OR SECTORS Chapter 33 - Sector-Relative Factors Work Best METHODOLOGY THE RESULTS
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