Article Understanding Investor Behavior

T2W Bot

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When it comes to money and investing, we’re not always as rational as we think we are – which is why there’s a whole field of study that explains our sometimes-strange behavior. Where do you, as an investor, fit in? Insight into the theory and findings of behavioral finance may help you answer this question.
Behavioral Finance: Questioning the Rationality AssumptionMuch economic theory is based on the belief that individuals behave in a rational manner and that all existing information is embedded in the investment process. This assumption is the crux of the efficient market hypothesis.
But, researchers questioning this assumption have uncovered evidence that rational behavior is not always as prevalent as we might believe. Behavioral finance attempts to understand and explain how human emotions influence investors in their decision-making process. You’ll be surprised at what they have found.
The FactsIn 2001 Dalbar, a financial-services research firm, released a...
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M

member275544

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I do believe I'm becoming more and more cycnical..anyway

"The Facts" (paragraph 2) is based on a study..there is no fact.
Quotes that the average investor would have been worse off than the S&P..blah blah blah
Who is the average investor? Whats the sample size of this one financial services firm? Oh you know what, I'm going to call this a fact!

I'll follow this up with behavioural finance "theory", regret "theory" aversion "theory"

and neatly conclude that an investor can be their own worst enemies over the long term because of these theories.

Complete pants. That's is my theory from an average investor.
 

Pat Riley

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In fact, as I think about it now, I reckon II got about 80% of it no more than one fifth of the way onto it.
 

0007

Senior member
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Coincidentally I'm currently reading a book on the same subject as the article. Author: Peterson – Inside the Investors Brain (the Power of Mind over Money). Published by Wiley 2007; you can find a free E copy on the Internet via Google. This is psychology for the layman trader psychologist and is quite helpful in explaining many of the psychological aspects of trading e.g. why we often make irrational decisions about risk. When I first read Pareto's article I thought it was an extract from the book since she does quote some standard psychological stuff. Although I find this a very interesting subject in its own right I'm not sure how much it will help the average trader (don't ask me to define average!) to improve their trading although I must admit it has helped me to understand some of my intuitive and non-logical thinking biases behind some of my trading.

I used to think this stuff was all mumbo-jumbo but I now find it very much more meaningful and helpful though I do think you will gain most from it if you are already trading soundly. I suspect that it's a Marmite subject and that if you consider Tharp, Steenbarger and their ilk to be largely a waste of time then I wouldn't recommend the article or the book I've quoted. Nevertheless, if you've got a bit of spare time and your mind is not closed to the psychological aspects of trading then I suggest giving it a go.

Having just glanced through the article again it does seem to be rather wishy-washy, generic and basically stating “the bleedin' obvious” - but there are the seeds of some reasonable topics there. I think you would find much of the book more palatable.
 
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Pat Riley

Established member
794 178
I'm floggin a dead horse here, but I may as well bury the nag here and now.

As I think about it now, I was about 20% of the way through the article when I thought I probably had about 80% of the meaning.
 
M

member275544

0 0
I'm floggin a dead horse here, but I may as well bury the nag here and now.

As I think about it now, I was about 20% of the way through the article when I thought I probably had about 80% of the meaning.
you might have to spell it out to us mate
 
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M

member275544

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perhaps all rogues eat tasty oranges
Pareto, yes I got that, but you mentioned it 4 times..I figured there was a hidden message that you were trying to allude to that was in some way cryptic to the article and we weren't quite with you. Trust me I tried. :innocent:
 

Pat Riley

Established member
794 178
Pareto, yes I got that, but you mentioned it 4 times..I figured there was a hidden message that you were trying to allude to that was in some way cryptic to the article and we weren't quite with you. Trust me I tried. :innocent:
No. Just the superficial pun. Nobody responded, until now (after I spelt it out, you utter morons). I'm goin to slit me feckin throat on video and post it on youtube "A Message to America and its Allies - Allah has a sense of humour and you don't, so die you heathen pig dogs".


and then I go and cut me own throat thus adding another layer of surrealist non-humour to the non-simmering pot of non-laughter not building, anywhere.
 
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darktone

Veteren member
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No. Just the superficial pun. Nobody responded, until now (after I spelt it out, you utter morons). I'm goin to slit me feckin throat on video and post it on youtube "A Message to America and its Allies - Allah has a sense of humour and you don't, so die you heathen pig dogs".


and then I go and cut me own throat thus adding another layer of surrealist non-humour to the non-simmering pot of non-laughter not building, anywhere.
Ok, i had lmao at that one :LOL:
 

trendie

Legendary member
6,452 1,081
I'm floggin a dead horse here, but I may as well bury the nag here and now.

As I think about it now, I was about 20% of the way through the article when I thought I probably had about 80% of the meaning.
I only got it at this post. :cheesy:
I had an inkling that was some point you were alluding to, but the penny didn't drop until this. :eek:

Duh!
 

0007

Senior member
2,367 653
I did wonder whether there's an 80/20 chance that Cathy Pareto is related ?
 
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