Product Description

The first book of its kind to delve into the fascinating and important subject of the psychology affecting investment. Combines behavioral knowledge from psychology, management, marketing, economics, and finance. Softcover.

Product Details

• Amazon Sales Rank: #555061 in Books
• Published on: 2002-01-15
• Original language: English
• Number of items: 1
• Binding: Paperback
• 95 pages

From the Back Cover

Traditional finance has focused on developing the tools that investors use to optimize expected return and risk. Understanding the motivations behind this behavior is extremely important when applying these financial tools. This is the first text of its kind to delve into the fascinating and important subject of the psychology affecting investments!

• Behavioral knowledge—Draws from psychology, management, marketing, economics, and finance.
  Students can easily understand the relevance, use, and importance of the material presented across different business disciplines.
• Examples of psychological biases—Illustrated with examples of everyday behavior, and the effect of psychological biases on investment decisions is then described.
  Shows students bow to overcome their biases to increase their wealth!
• Both investment as well as non-investment examples—Used throughout the text to illustrate how different concepts relate to investing.
  This approach first helps students see how the behavior covered relates to everyday life and then ties the behavior to investment decisions.

Excerpt. © Reprinted by permission. All rights reserved.

An old Wall Street adage states that two factors move the market: fear and greed. Although true, this characterization is far too simplistic. The human mind is very sophisticated, and human emotions are very complex. The emotions of fear and greed just don't adequately describe the psychology that affects people. This book is one of the first texts to delve into this fascinating and important subject.

Few other texts provide this information because traditional finance has focused on developing the tools that investors use to optimize expected return and risk. This endeavor has been fruitful, yielding tools such as asset pricing models, portfolio theories, and option pricing. Although investors should use these tools in their investment decision making, they typically do not. We tend not to use these tools because psychology affects our decisions more than financial theory does.

Unfortunately, your psychological biases inhibit your ability to make good investment decisions. By learning about your psychological biases, you can overcome them and increase your wealth. You will notice that most of the chapters are structured in a similar way. I first describe the psychological bias and illustrate it with everyday behavior (such as driving a car). The effect of the bias on investment decisions is then described. Lastly, I use academic studies to show that investors really do have the problem.

This material does not replace the investment texts of traditional finance. Understanding psychological biases complements the traditional finance tools. Indeed, after reading this book you should be convinced that traditional tools are valuable.

Excerpt. © Reprinted by permission. All rights reserved.

An old Wall Street adage states that two factors move the market: fear and greed. Although true, this characterization is far too simplistic. The human mind is very sophisticated, and human emotions are very complex. The emotions of fear and greed just don't adequately describe the psychology that affects people. This book is one of the first texts to delve into this fascinating and important subject.

Few other texts provide this information because traditional finance has focused on developing the tools that investors use to optimize expected return and risk. This endeavor has been fruitful, yielding tools such as asset pricing models, portfolio theories, and option pricing. Although investors should use these tools in their investment decision making, they typically do not. We tend not to use these tools because psychology affects our decisions more than financial theory does.

Unfortunately, your psychological biases inhibit your ability to make good investment decisions. By learning about your psychological biases, you can overcome them and increase your wealth. You will notice that most of the chapters are structured in a similar way. I first describe the psychological bias and illustrate it with everyday behavior (such as driving a car). The effect of the bias on investment decisions is then described. Lastly, I use academic studies to show that investors really do have the problem.

This material does not replace the investment texts of traditional finance. Understanding psychological biases complements the traditional finance tools. Indeed, after reading this book you should be convinced that traditional tools are valuable.

Customer Reviews

Great Book
Most of the typical psychology of trading books just regurgitate the same 'ol same 'ol. This one hits all the bases with examples to back them up - and no fluff. I really appreciated how everything was condensed and to the point without having to read a lengthy discourse on each topic. That made it easy to digest the material and left me with a lot to think about. This was the best book I've read in it's class. Well worth reading.

Good summary of how behavior affects investing decisions
This book contains a good summary of the different ways in which what we think affects investing decisions we make. I liked the fact that the book is short and to the point and does not use psychological jargon. I found it quite insightful and could identify with several of the traits and thought processes the book describes, I would recommend it to anyone who makes their own investment decisions

A very good book that proves sometimes less is more.
I really liked this book. Nofsinger makes a clear and concise case against the existence of a rational investing "homo economicus", a key assumption of modern portfolio theory. The book is well footnoted and a good place to start learning the underlying tenants of behavioral finance.