Beyond Greed and Fear Understanding Behavioral Finance and the Psychology of Investing

by Shefrin, Hersh

• ISBN13: 9780195161212
• ISBN10: 0195161211
• Format: Hardcover
• Copyright: 2002-09-26
• Publisher: Oxford University Press

Summary

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 fundamentalsof 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 financialstrategy. 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 pointsout 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 investmentstrategies.

Author Biography

Hersh Shefrin holds the Mario L. Belotti Chair in Finance at the Leavey School of Business, Santa Clara University.

Table of Contents

Preface	p. ix
What Is Behavioral Finance?	p. 1
Introduction	p. 3
Heuristic-Driven Bias: The First Theme	p. 13
Frame Dependence: The Second Theme	p. 23
Inefficient Markets: The Third Theme	p. 33
Prediction	p. 43
Trying to Predict the Market	p. 45
Sentimental Journey: The Illusion of Validity	p. 59
Picking Stocks to Beat the Market	p. 69
Biased Reactions to Earnings Announcements	p. 91
Individual Investors	p. 105
"Get-Evenitis": Riding Losers Too Long	p. 107
Portfolios, Pyramids, Emotions, and Biases	p. 119
Retirement Saving: Myopia and Self-Control	p. 139
Institutional Investors	p. 157
Open-Ended Mutual Funds: Misframing, "Hot Hands," and Obfuscation Games	p. 159
Closed-End Funds: What Drives Discounts?	p. 175
Fixed Income Securities: The Full Measure of Behavioral Phenomena	p. 193
The Money Management Industry: Framing Effects, Style "Diversification," and Regret	p. 213
The Interface between Corporate Finance and Investment	p. 225
Corporate Takeovers and the Winner's Curse	p. 227
IPOs: Initial Underpricing, Long-term Underperformance, and "Hot-Issue" Markets	p. 239
Optimism in Analysts' Earnings Predictions and Stock Recommendations	p. 257
Options, Futures, and Foreign Exchange	p. 271
Options: How They're Used, How They're Priced, and How They Reflect Sentiment	p. 273
Commodity Futures: Orange Juice and Sentiment	p. 289
Excessive Speculation in Foreign Exchange Markets	p. 299
Final Remarks	p. 309
Notes	p. 311
References	p. 333
Credits	p. 351
Index	p. 359
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