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Psychology of Investing

by: Nofsinger, John R.

Psychology of Investing

by: Nofsinger, John R.

ISBN 13:
9780136117032
ISBN 10:
0136117031
Edition: 4th
Format: Paperback
Copyright: 02/16/2010
Publisher: Prentice Hall
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Summary

The Psychology of Investingis the first text of its kind to delve into the fascinating subject of how psychology affects investing. Psychology and Finance; Overconfidence; Pride and Regret; Risk Perceptions; Decision Frames; Accounting; Forming Portfolios; Representativeness and Familiarity; Social Interaction and Investing; Emotion and Investment Decisions; Self-Control and Decision Making For anyone interested in investing (either professionally or personally), as well as portfolio managers, fund managers, pension managers, financial advisers, brokers, financial planners, traders, financial analysts, and CPAs.

Preface	p. ix
Psychology and Finance	p. 1
Traditional versus Behavioral Finance	p. 2
Prediction	p. 3
Behavioral Finance	p. 5
Sources of Cognitive Errors	p. 6
Bias and Wealth Impact	p. 8
What to Expect	p. 9
Questions	p. 10
Endnotes	p. 10
Overconfidence	p. 11
Overconfidence Affects Investor Decisions	p. 12
Overconfident Trading	p. 13
Overconfidence and the Market	p. 16
Overconfidence and Risk	p. 16
Illusion of Knowledge	p. 17
Illusion of Control	p. 19
Choice	p. 19
Outcome Sequence	p. 19
Task Familiarity	p. 19
Information	p. 19
Active Involvement	p. 19
Past Successes	p. 20
Online Trading	p. 20
Online Trading and Performance	p. 21
Questions	p. 22
Endnotes	p. 22
Pride and Regret	p. 24
Disposition Effect	p. 24
Disposition Effect and Wealth	p. 25
Tests of Avoiding Regret and Seeking Pride	p. 26
International Tests of the Disposition Effect	p. 28
Disposition Outside the Stock Market	p. 28
Selling Winners Too Soon and Holding Losers Too Long	p. 29
Disposition Effect and News	p. 29
Reference Points	p. 30
Can the Disposition Effect Impact the Market?	p. 31
Disposition and Investor Sophistication	p. 32
Summary	p. 32
Questions	p. 33
Endnotes	p. 33
Risk Perceptions	p. 35
House-Money Effect	p. 36
Snakebite (or Risk Aversion)	p. 36
Trying to Break Even	p. 36
Effect on Investors	p. 37
Endowment (or Status Quo Bias) Effects	p. 38
Endowment and Investors	p. 39
Perception of Investment Risk	p. 39
Memory and Decision Making	p. 40
Memory and Investment Decisions	p. 40
Cognitive Dissonance	p. 41
Cognitive Dissonance and Investing	p. 41
Summary	p. 44
Questions	p. 44
Endnotes	p. 44
Decision Frames	p. 46
Framing and Choice	p. 46
Framing and Investing	p. 48
Framing and the Risk-Return Relationship	p. 48
Framing and Prediction	p. 50
Thinking Mode and Decision Processes	p. 50
Measuring Thinking Mode	p. 51
Risk Framing and Thinking Style	p. 52
Framing Pension Decisions	p. 53
Summary	p. 53
Questions	p. 54
Endnotes	p. 54
Mental Accounting	p. 55
Mental Budgeting	p. 56
Matching Costs to Benefits	p. 56
Matching Debt	p. 57
Sunk-Cost Effect	p. 58
Economic Impact	p. 59
Mental Accounting and Investing	p. 60
Investor Trading	p. 60
Asset Allocation	p. 61
Market Impact	p. 64
Questions	p. 64
Endnotes	p. 65
Forming Portfolios	p. 66
Modern Portfolio Theory	p. 66
Mental Accounting and Portfolios	p. 66
Perceptions on Risk	p. 68
Risk Perception in the Real World	p. 70
Building Behavioral Portfolios	p. 70
Household Portfolios	p. 72
Naïve Diversification	p. 73
Retirement Plans	p. 74
Questions	p. 75
Endnotes	p. 75
Representativeness and Familiarity	p. 76
Representativeness	p. 76
Representativeness and Investing	p. 77
Extrapolation Bias	p. 78
Familiarity	p. 80
Familiarity Breeds Investment	p. 81
Local Bias	p. 83
Familiarity Breeds Investment Problems	p. 84
Combining Familiarity and Representativeness Biases	p. 85
Questions	p. 86
Endnotes	p. 86
Social Interaction and Investing	p. 88
Talking the Talk	p. 89
Imitate Thy Neighbor's Portfolio	p. 89
Social Environment	p. 89
Investment Clubs	p. 91
Investment Club Performance	p. 91
Investment Clubs and Social Dynamics	p. 93
The Media	p. 93
Speed Is Not of the Essence	p. 94
Herding	p. 95
Herding into Stocks	p. 95
"A Rose.com by Any Other Name"	p. 96
Short-Term Focus	p. 96
Faith	p. 97
Social Validation	p. 97
Questions	p. 97
Endnotes	p. 97
Emotion and Investment Decisions	p. 99
Feelings and Decisions	p. 99
Feelings and Finance	p. 100
Feelings Affect Investment Decisions	p. 101
Sunshine	p. 101
Negative Emotions	p. 103
Optimism	p. 104
Sentiment	p. 106
Market Bubbles	p. 107
The Thrills of Investing	p. 108
Summary	p. 109
Questions	p. 109
Endnotes	p. 110
Self-Control and Decision Making	p. 111
Short-Term versus Long-Term Focus	p. 112
Controlling Yourself	p. 112
Saving and Self-Control	p. 113
401(k) and IRA Plans	p. 114
Self-Control and Dividends	p. 115
Beating the Biases	p. 116
Understand the Biases	p. 116
Know Why You Are Investing	p. 116
Have Quantitative Investment Criteria	p. 117
Diversify	p. 117
Control Your Investing Environment	p. 117
Additional Rules of Thumb	p. 118
Using Biases for Good	p. 119
Save More Tomorrow	p. 119
Save and Win	p. 120
Questions	p. 121
Endnotes	p. 121
Credits	p. 123
Index	p. 124
Table of Contents provided by Ingram. All Rights Reserved.

Amazon no longer offers textbook rentals. We do!

Psychology of Investing

Psychology of Investing

9780136117032

0136117031

Summary

Table of Contents

Supplemental Materials

Write a Review

Amazon no longer offers textbook rentals. We do!

Psychology of Investing

Psychology of Investing

9780136117032

0136117031

Summary

Table of Contents

Supplemental Materials

Write a Review

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