Money, investing, and the Human spirit
The groundbreaking work of psychologists Daniel Kahneman and Amos Tversky in the 1970s-1980s and the follow-on psychological research that has been conducted over the last three decades have revealed striking insights on the complex ways in which the human mind operates. This research identified pervasive, deep-seeded, subconscious biases and heuristics that occur in human decision-making, and revealed an entirely new perspective on why we behave as we do. While these revelations have their origins in psychology, they hold such important implications for the world of finance that Kahneman was awarded the Nobel Prize in Economics. With the addition of recent Nobel Laureates Robert Shiller (2013) and Richard Thaler (2017), a total of six Nobel prizes have now been awarded for behavioral research. The body of work that has ensued thus represents an entirely new field of endeavor, referred to as behavioral finance and economics.
The applications of behavioral science to finance are now broad and well researched. They encompass activities such as spending, investing, trading, financial planning, portfolio management and business commerce. In addition, behavioral implications are also turning on end some of the former Nobel prize-winning theories about how economies and financial markets function.
Nonetheless, behavioral finance is still young and is only now beginning to make its way into mainstream academia, industry and society. The goal of BehavioralFinance.com is to provide a home for this exciting new field – one that facilitates education, research, application, and ethical practice, while supporting a vibrant worldwide community of people with an interest and a passion in the subject. We hope to see you become part of that community and to take this educational journey with us.
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The Behavior Fi Community
Advisors & Planners
Redefine advisor-client relationships by employing insights on biases,
risk-tolerance, cultural, and emotional characteristics. Use behavioral perspectives as a competitive differentiator.
Behavioral factors are now seen as perhaps the single greatest hindrance to investment performance among individual investors. Individuals must know how to deal with a host of unconscious behavioral challenges if they expect to manage their own money.
Portfolio managers and traders can only expect to optimize their performance (and compete with computers) with a thorough understanding of the human decision process. In addition, behavior-based anomalies offer savvy managers a viable path to achieving alpha.
Behavioral implications are paramount to financial institutions of all sizes and specialties. Those who do not fully embrace behavioral science may truly risk their competitive positioning and jeopardize their long term sustainability.
Marketers and CSRs
Behavioral insights are indispensable to marketers and client-facing personnel in financial services firms. Marketing programs and customer service functions will need to fully understand and recognize behavioral factors in order to perform their roles effectively.
Public company executives and their investor relations teams cannot afford to ignore the behavioral characteristics of their stockholders. For that matter, they cannot ignore the impact of their own behavior on the success of their companies as well.