Managing Equity Portfolios: A Behavioral Approach to Improving Skills and Investment Processes

Managing Equity Portfolios: A Behavioral Approach to Improving Skills and Investment Processes

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Product Details

ISBN-13: 9780262028349
Publisher: MIT Press
Publication date: 10/24/2014
Series: The MIT Press
Pages: 304
Product dimensions: 6.10(w) x 9.10(h) x 1.00(d)
Age Range: 18 Years

About the Author

Michael A. Ervolini is CEO of Cabot Research, a global software company that provides innovative analytics to money managers to help them improve portfolio performance.

Table of Contents

Foreword Terrance Odean ix

Preface xv

Acknowledgments xvii

Introduction xix

Part 1 Game Change

1 Industry Challenges 3

2 Why Johnny Can't Improve 19

3 New Analytic Framework 39

4 Process and Behaviors 51

5 Feedback in Action 67

6 Phantastic Risks 77

Part 2 Behavioral Matters

7 What Drives Selling? 87

8 Sell the Way You Buy-Strategically 91

9 Bearing Up in a Bear Market 95

10 Aching Conviction 99

11 Unconscious Deliberation 103

12 Investing in Self-Awareness 107

13 Stressing Performance 111

14 Thesis, Narrative, or Just Another Disappointing Story 115

15 Dreaming of Alpha 119

16 Motivated Reasoning 123

17 Regrettable Choices 127

18 Endowing Success 131

19 Counterfactual Investing 135

20 Great Investing Is Not Natural 139

21 Inside-Out Investing 143

22 Beware Phantastic Investments 147

23 Thanks for the Memories 153

24 Skills, Process, and Behaviors 157

25 Processing Success 161

26 Primed for Success 165

27 Fear, Anger, and Risk 171

28 Successful Choices 175

29 Changing for the Better 179

30 Portfolio Thinking 183

31 Promiscuous Thinking 187

32 Getting in the Flow 191

33 Believing Is Seeing 195

34 A Storied Portfolio 201

35 The Trouble with Improving 207

36 Tired Investing 211

37 That Winning Feeling 215

38 Hold That Thought 219

39 Overcoming Overconfidence 223

40 The Power of Vulnerability 227

Part 3 Improving Right Away

Project 1 Embracing the Scientific Method 233

Project 2 Maintaining a Diary 239

Project 3 Accounting for Skill 243

Project 4 Learning about Buying Skill 249

Project 5 Measuring Your Sell Effectiveness 253

Project 6 Calibrating Sizing 257

Project 7 Checklists 261

Epilogue 267

Glossary 271

What People are Saying About This

Warren Touwen

The Disciplined Trader meets Moneyball. This book is a worthwhile read for any portfolio manager, analyst, or trader focused on continual improvement and even greater success.

From the Publisher

The Disciplined Trader meets Moneyball . This book is a worthwhile read for any portfolio manager, analyst, or trader focused on continual improvement and even greater success.

Warren Touwen , Core Product, BloombergFor fund managers seeking to improve their investing skills there are many publications offering tantalizing but fragmented paths for progress. In this book Michael Ervolini brings together topics such as fast and slow thinking, checklists, and self-awareness to construct coherent and pragmatic solutions. Using the principles of the scientific method he shows how a successful investment process can evolve through time, improving the consistency of decision making and keeping investing skills relevant in an ever-changing world.

Simon Savage , Asset Manager, GLG PartnersMichael Ervolini is a clever man in touch with reality. Recognizing that portfolio management is a tough, challenging business full of conflicts, he gets it that rationality is easy to talk about but difficult to implement. It requires recognition of deep uncertainty and the human resource that is emotion. Since passive investing puts you at the mercy of the market, active portfolio management has to be made to work. It can be, Ervolini says, if there is proper feedback. It requires a willingness to be curious about what we do and to create ways to learn from experience. This is what he does in this book. Read it!

David Tuckett , Director, Centre for the Study of Decision-Making Uncertainty, University College, LondonAfter years of deep, questioning research into the biases and beliefs that can undermine the 'normal' behavior of equity portfolio managers, Michael Ervolini skillfully tells us how to improve our choices. He does this by providing practical ideas for learning how to do more of what we already do well and how to identify and fix what is not working. No asset class and no asset manager are immune from human fallibility when it comes to portfolio decisions, and with the help of this book you can learn how to showcase your skills while modifying behavioral tendencies.

Arnold S. Wood , President and Chief Executive Officer, Martingale Asset Management

Endorsement

After years of deep, questioning research into the biases and beliefs that can undermine the 'normal' behavior of equity portfolio managers, Michael Ervolini skillfully tells us how to improve our choices. He does this by providing practical ideas for learning how to do more of what we already do well and how to identify and fix what is not working. No asset class and no asset manager are immune from human fallibility when it comes to portfolio decisions, and with the help of this book you can learn how to showcase your skills while modifying behavioral tendencies.—Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management

David Tuckett

Michael Ervolini is a clever man in touch with reality. Recognizing that portfolio management is a tough, challenging business full of conflicts, he gets it that rationality is easy to talk about but difficult to implement. It requires recognition of deep uncertainty and the human resource that is emotion. Since passive investing puts you at the mercy of the market, active portfolio management has to be made to work. It can be, Ervolini says, if there is proper feedback. It requires a willingness to be curious about what we do and to create ways to learn from experience. This is what he does in this book. Read it!

Arnold S. Wood

After years of deep, questioning research into the biases and beliefs that can undermine the 'normal' behavior of equity portfolio managers, Michael Ervolini skillfully tells us how to improve our choices. He does this by providing practical ideas for learning how to do more of what we already do well and how to identify and fix what is not working. No asset class and no asset manager are immune from human fallibility when it comes to portfolio decisions, and with the help of this book you can learn how to showcase your skills while modifying behavioral tendencies.

Simon Savage

For fund managers seeking to improve their investing skills there are many publications offering tantalizing but fragmented paths for progress. In this book Michael Ervolini brings together topics such as fast and slow thinking, checklists, and self-awareness to construct coherent and pragmatic solutions. Using the principles of the scientific method he shows how a successful investment process can evolve through time, improving the consistency of decision making and keeping investing skills relevant in an ever-changing world.

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