The Psychology of Investing / Edition 1

The Psychology of Investing / Edition 1

by John R. Nofsinger
     
 

ISBN-10: 0130930245

ISBN-13: 9780130930248

Pub. Date: 11/28/2001

Publisher: Pearson Education

The first book of its kind to delve into the fascinating and important subject of the psychology affecting investment. No other book provides this information because traditional finance focuses on developing the tools in which investors use to optimize expected return and risk. The author believes that understanding the psychology of investing is just as important as…  See more details below

Overview

The first book of its kind to delve into the fascinating and important subject of the psychology affecting investment. No other book provides this information because traditional finance focuses on developing the tools in which investors use to optimize expected return and risk. The author believes that understanding the psychology of investing is just as important as knowing the traditional investment topics. Combines behavioral knowledge from psychology, management, marketing, economics, and finance. Uses investment as well as non investment examples. For financial planners, investment managers, individual investors, or to be used as a training manual or reference in financial companies.

Product Details

ISBN-13:
9780130930248
Publisher:
Pearson Education
Publication date:
11/28/2001
Edition description:
Older Edition
Pages:
95
Product dimensions:
6.02(w) x 8.88(h) x 0.12(d)

Table of Contents

Preface
Ch. 1Psychology and Finance1
A Simple Illustration2
Prediction3
Long Term Capital Management5
Behavioral Finance6
What to Expect6
Ch. 2Overconfidence9
How Overconfidence Affects Investor Decisions10
Overconfidence and Risk14
Illusion of Knowledge14
Illusion of Control16
Online Trading17
Online Trading and Performance18
Ch. 3Fear of Regret and Seeking Pride21
Disposition Effect21
Disposition Effect and Wealth22
Tests of Avoiding Regret and Seeking Pride23
The Market for Houses25
Selling Winners Too Soon and Holding Losers Too Long26
Disposition Effect and News27
Reference Points28
Ch. 4Considering the Past31
House Money Effect31
Snake Bite (or Risk Aversion)32
Trying to Break Even32
Effect on Investors33
Endowment (or Status Quo Bias) Effects33
Endowment and Investors34
Memory and Decision Making35
Memory and Investment Decisions36
Cognitive Dissonance37
Cognitive Dissonance and Investing38
Summary39
Ch. 5Mental Accounting43
Mental Budgeting44
Matching Costs to Benefits44
Aversion to Debt46
Sunk-Cost Effect46
Economic Impact47
Mental Accounting and Investing48
Ch. 6Forming Portfolios51
Modern Portfolio Theory51
Mental Accounting and Portfolios51
Perceptions on Risk53
Risk Perception in the Real World56
Building Behavioral Portfolios56
Naive Diversification58
Retirement Plans59
Ch. 7Representativeness and Familiarity61
Representativeness61
Representativeness and Investing62
Familiarity64
Familiarity Breeds Investment65
Familiarity Breeds Investment Problems67
Ch. 8Investor Socialization and Mania71
Sharing Investment Knowledge71
Herding72
Speed is of the Essence (Not!)72
Investment Clubs73
Market Mania76
A Rose.com by Any Other Name77
The More Things Change ...78
Ch. 9Self-Control and Decision Making81
Short-Term versus Long-Term Focus82
Controlling Yourself82
Saving and Self-Control83
401(k) and IRA Plans84
Self Control and Dividends85
Beating the Biases87
Additional Rules of Thumb90
Index93

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