Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases (Wiley Finance) 

 

Fear and greed drive markets, as well as good and bad investment decision-making. In Behavioral Finance and Wealth Management, financial expert Michael Pompian shows you, whether you're an investor or a financial advisor, how to make better investment decisions by employing behavioral finance research. Pompian takes a practical approach to the science of behavioral finance and puts it to use in the real world. He reveals 20 of the most prominent individual investor biases and helps you properly modify your asset allocation decisions based on the latest research on behavioral anomalies of individual investors.

""Pompian is handing you the magic book, the one that reveals your behavioral flaws and shows you how to avoid them. The tricks to success are here. Read and do not stop until you are one of very few magicians."" Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management Fear and greed drive markets, as well as good and bad investment decision-making. In Behavioral Finance and Wealth Management, financial expert Michael Pompian shows you, whether you're an investor or a financial advisor, how to make better investment decisions by employing behavioral finance research. Pompian takes a practical approach to the science of behavioral finance and puts it to use in the real world. He reveals 20 of the most prominent individual investor biases and helps you properly modify your asset allocation decisions based on the latest research on behavioral anomalies of individual investors.

As a private investor, I have found Mr. Pompian's book to have a meaningful influence on my investing behavior. Through reading the book, I have learned from past mistakes and learned what to avoid in future investing activities. He is effective in blending theoretical behavioral finance ideas with practical application. I found it particularly useful because the book was written by practitioner of wealth management who has sat across the table from many clients. This is a must read for investor and advisors. 

Summary: Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases

Michael Pompian has written a book that will prove invaluable to wealth advisors serious about "getting it right" for their clients.

The hardest task a wealth advisor faces is determining the "real" risk tolerance of his or her client. Behavioral finance, when it began to be discussed in the journals, promised the wealth advisor great help in this regard. However, applying its academic principles to real-world situations was challenging for the practicing wealth advisor. Mr. Pompian's book gives real help in meeting this challenge.

Mr. Pompian describes the various biases investors possess and how they affect investment choices and the investor's reaction to the various consequences that flow from those choices. Of greatest value, in my opinion, are the practical assessment tools Mr. Pompian provides.

It took some time for Modern Portfolio Theory to have an impact on real portfolios. Important, practical books along the way helped. The same can be said of Behavioral Finance; Mr. Pompian's book is the first of what we practioners hope is a long list of practical books that will allow Behavioral Finance to have the great impact it surely will.

This book is a "must-read" for the conscientious wealth advisor. I hope that a second edition provides either an interactive website access or a CD with an assessment instrument.

 This book provides tremendous insights into the mindset of investors. Pompian explains relatively complex behavioral finance topics in a very fluid and easy to understand manner. This book is a "must have" for advisors who really want to understand the emotional biases that influence their client's investment decisions.

As an investment consultant working with high net worth private wealth clients I have found Mr. Pompian's book invaluable. Understanding clients' views and the bias they bring to the table is crucial to helping them overcome their emotions in order to create a sound and diversified institutional quality portfolio. The best finance book I have read since Benjamin Graham's classic, The Intelligent Investor.

In a remarkably lucid book, Pompian provides an excellent overview of different cognitive and emotional biases that affect investor behavior other researchers have shown to exist or have characterized well. In this book, each of the biases (over 20 of them) are succinctly defined. Then, the author presents the ramifications of that bias with respect to investor behavior and how it can manifest itself. Further, he provides a brief discussion on how the effect of that bias can be addressed (in this section, he writes as if he is talking only to financial advisers, though the discussion is apt for any investor). In addition, each chapter contains some self-tests that can indicate whether that bias exists or not. Overall, an excellent book for a serious investor and any novice researcher in this field. A must-have. In addition to these books, the reader may be interested in the two books written by Brett N. Steenbarger.

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Contents
Preface ix
Acknowledgments xvii
PART ONE
Introduction to the Practical Application of Behavioral Finance
CHAPTER 1 What Is Behavioral Finance? 3
CHAPTER 2 The History of Behavioral Finance Micro 19
CHAPTER 3 Incorporating Investor Behavior into the Asset
Allocation Process 39
PART TWO
Investor Biases Defined and Illustrated
CHAPTER 4 Overconfidence Bias 51
CHAPTER 5 Representativeness Bias 62
CHAPTER 6 Anchoring and Adjustment Bias 75
CHAPTER 7 Cognitive Dissonance Bias 83
CHAPTER 8 Availability Bias 94
CHAPTER 9 Self-Attribution Bias 104
CHAPTER 10 Illusion of Control Bias 111
CHAPTER 11 Conservatism Bias 119
CHAPTER 12 Ambiguity Aversion Bias 129
CHAPTER 13 Endowment Bias 139
CHAPTER 14 Self-Control Bias 150
CHAPTER 15 Optimism Bias 163
CHAPTER 16 Mental Accounting Bias 171
CHAPTER 17 Confirmation Bias 187
CHAPTER 18 Hindsight Bias 199
CHAPTER 19 Loss Aversion Bias 208
CHAPTER 20 Recency Bias 216
CHAPTER 21 Regret Aversion Bias 227
CHAPTER 22 Framing Bias 237
CHAPTER 23 Status Quo Bias 248
PART THREE
Case Studies
CHAPTER 24 Case Studies 257
PART FOUR
Special Topics in Practical Application of Behavioral Finance
CHAPTER 25 Gender, Personality Type, and Investor Behavior 271
CHAPTER 26 Investor Personality Types 282
CHAPTER 27 Neuroeconomics: The Next Frontier for Explaining
Investor Behavior 295
Notes 303
Index 311

About the Author 318

[此贴子已经被作者于2007-12-11 0:33:04编辑过]