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

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

by Hersh Shefrin

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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 fundamentals of 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 financial strategy. 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 points out 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 investment strategies.

Product Details

ISBN-13: 9780199792603
Publisher: Oxford University Press
Publication date: 09/15/1999
Series: Financial Management Association Survey and Synthesis
Sold by: Barnes & Noble
Format: NOOK Book
Sales rank: 910,440
File size: 4 MB

About the Author

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

Table of Contents


    Part I-What Is Behavioral Finance?

    1. Introduction
    2. Heuristic-Driven Bias: The First Theme
    3. Frame Dependence: The Second Theme
    4. Inefficient Markets: The Third Theme

    Part II-Prediction

    5. Trying to Predict the Market
    6. Sentimental Journey: The Illusion of Validity
    7. Picking Stocks to Beat the Market
    8. Biased Reactions to Earnings Announcements

    Part III-Individual Investors

    9. "Get-evenitis": Riding Losers Too Long
    10. Portfolios, Pyramids, Emotions, and Biases
    11. Retirement Saving: Myopia and Self-Control

    Part IV-Institutional Investors

    12. Open-ended Mutual Funds: Misframing, "Hot Hands," and Obfuscation Games
    13. Closed-end Funds: What Drives Discounts?
    14. Fixed Income Securities: The Full Measure of Behavioral Phenomena
    15. The Money Management Industry: Framing Effects, Style "Diversification," and Regret

    Part V-The Interface Between Corporate Finance and Investment

    16. Corporate Takeovers and the Winner's Curse
    17. IPOs: Initial Underpricing, Long-term Underperformance, and "Hot
    Issue" Markets
    18. Optimism in Analysts' Earnings Predictions and Stock

    Part VI-Options, Futures, and Foreign Exchange

    19. Options: How They're Used, How They're Priced, and How They Reflect
    20. Commodity Futures: Orange Juice and Sentiment
    21. Excessive Speculation in Foreign Exchange Markets Final Remarks


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Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing 4.7 out of 5 based on 0 ratings. 3 reviews.
gq2000 on LibraryThing More than 1 year ago
A bit too academic, but overall a good read to understand the field of behavior finance.
Guest More than 1 year ago
This book is a must for those interested in investor psychology and particularly behavioral finance. Even though it is written for people with some knowledge of finance, this book presents in a rather understandable way, all the behavioral ideas behind the market mispricings.
Guest More than 1 year ago
If only you could bring yourself to ditch those losers from your portfolio, and hang onto your winners. If you can, you are unusual. Unprofitable habits afflict nearly all investors, beginners and pros alike, writes Hersh Shefrin in this intriguing study of the role of emotions in investing. Shefrin balances the jargon with plenty of real-world examples and wisely cautions you not to delude yourself into thinking that his tips will make you rich. Viewing investing through the prism of behavior finance, he analyzes emotionally-laden decisions made by private investors, money managers, bankers and other professionals handling stocks and various other forms of investments including options, foreign currency and futures. Shefrin offers juicy case histories, so his tour of behavioral finance is mostly enjoyable and useful. At times, though, the book bogs down in the authorâ¿¿s attempts to legitimize behavior finance, a relatively new school of thought. For instance, he charges failed investors with committing 'heuristic bias' or falling prey to 'representativeness.' That quibble aside, we recommend this intriguing tome to investment decision makers on any level. Whether you are running billions or managing a retirement account (which, as Shefrin notes, most people do badly), maybe this book will buffer you against emotional investing and pocketbook pain.