Mean Markets and Lizard Brains : How to Profit from the New Science of Irrationality

by Burnham, Terry

• ISBN13: 9780470343760
• ISBN10: 0470343761
• Format: Paperback
• Copyright: 2008-09-29
• Publisher: Wiley

Summary

Everyone from journalists to market pros are turning to behavioral finance to explain, analyze, and predict market direction. In contrast to old-school assumptions of cool-headed rationality, the new behavioral school embraces hot-blooded human irrationality as a core feature of both individuals and financial markets. The 2002 Nobel Prize in Economics was awarded to scholars of this new scientific approach to irrationality. In Mean Markets and Lizard Brains, Terry Burnham, an economist who has a proven ability to translate complex topics into everyday language, reveals the biological causes of irrationality. The human brain contains ancient structures that exert powerful and often unconscious influences on behavior. This "lizard brain" may have helped our ancestors eat and reproduce, but it wreaks havoc with our finances. Going far beyond cataloguing our financial foibles, Dr. Burnham applies this novel approach to all of today's most important financial topics: the stock market, the economy, real estate, bonds, mortgages, inflation, and savings. This broad and scholarly investigation provides an in-depth look at why manias, panics, and crashes happen, and why people are built to want to buy at irrationally high prices and sell at irrationally low prices. Most importantly, by incorporating the new science of irrationality, readers can position themselves to profit from financial markets that often seem downright mean. Mean Markets and Lizard Brains skillfully identifies the craziness that is part of human nature, helps us see it in ourselves, and then shows us how to profit from a world that doesn't always make sense.TERRY BURNHAM is a leader in the application of biology to economics and finance. He was an economics professor at Harvard for many years, beginning at the Kennedy School and, most recently, at the Harvard Business School. His biological research has taken him to Africa to observe wild chimpanzees and to the laboratory to study the role of testosterone in negotiation. He is coauthor of the international bestseller Mean Genes. Before joining the Harvard faculty, he worked at Goldman Sachs & Co. and was the president and CFO of the successful start-up biotechnology firm, Progenics Pharmaceuticals, whose work in AIDS and cancer treatment has been widely praised. Dr. Burnham has a PhD in business economics from Harvard University, a master's in finance from MIT, an MS in computer science from San Diego State University, and a BS in biophysics from the University of Michigan. He served with distinction as a tank driver in the U.S. Marine Corps..

Author Biography

Terry Burnham is a leader in the application of biology to economics and finance. He is the Director of Economics at Acadian Asset Management LLC, and a research scientist at Harvard University. He was an economics professor at Harvard for many years, and has been an active and extremely successful participant in the financial markets for over twenty years. Dr. Burnham has a PhD in business economics from Harvard University, a master's in finance from MIT, an MS in computer science from San Diego State University, and a BS in biophysics from the University of Michigan. He is also a coauthor of the international bestseller Mean Genes: From Sex to Money to Food, Taming Our Primal Instincts.

Table of Contents

Preface to the New Edition	p. v
Preface to the First Edition	p. ix
Acknowledgments	p. xi
Introduction: Mean Markets and Lizard Brains	p. 1
The New Science of Irrationality	p. 9
Crazy People: Lizard Brains and the New Science of Irrationality	p. 11
Cognitive confusion
Split-brains
Superstitious pigeons
Neuroeconomics
Winning
Crazy World: Mean Markets and the New Science of Irrationality	p. 35
Stampedes
Invisible hands
Efficient markets
Financial blind spots
Opportunity
The Old Art of Macroeconomics	p. 63
U.S. Economic Snapshot: America the Talented Debtor	p. 65
Profligacy & productivity
Keynes' grandchildren
Darwin's elephants
Prosperity
Inflation: Rising Prices and Shrinking Dollars	p. 87
Kidney barter
Rice dollars
Seashell arbitrage
Jubilee
Yogi Berra's diet
Protection
Deficits and Dollars: Uncle Sam the International Beggar	p. 119
Loan sharks
A golden brain squandered
Limp loonies and plummeting pesos
Escape
Applying Science and Art to Bonds, Stocks, and Real Estate	p. 143
Bonds: Are They Only for Wimps?	p. 145
Reagan bonds
The mother of all deficits
Social security lockbox
Squirrel savings
Profit
Stocks: For the Long Run or for Losers?	p. 167
Time travel
Michael Jordan
Stock speed limits
Tears and a journey
Stock picks
Real Estate: Live in Your Home; Make Your Money at Work	p. 203
Tiger Woods
Godzilla
Groucho Marx
Risky ARMs
Housing bubble
Advice
Profiting from the New Science of Irrationality	p. 239
Timeless Advice: How to Shackle the Lizard Brain	p. 241
Isiah Thomas
Humans in zoos
Lizard logic
Mast-strapping
Beware the red zone
8 timeless tips
Timely Advice: Investing in the Meanest of Markets	p. 277
A golden generation
Lizard brain kryptonite
B.F. Skinner
Returns without risk
Notes	p. 305
Index	p. 315
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