Monday, January 12, 2009

Sewell's Behavioural Finance

Having discovered behaviouralfinance.net through the references to Mauboussin's `Decision Making for Investors', I realised the necessity for a fair amount of background reading into Behavioural Finance.

Martin Sewell, from University College London, gives a survey of all the major contributions since the field started in `An Introduction to Behavioural Finance.'

The bits that jumped out at me to look at further include a study by Thaler in 1980 where he identifies 5 problems that arise through biases in our decision making:
  1. Underweighting of opportunity costs
  2. Failure to ignore sunk costs
  3. Search Behaviour
  4. Choosing not to choose and regret
  5. precommitment and self-control
The books I am probably going to try get ahold of and read (comments welcome of a better place to start) are, in likely order:

1 comment:

  1. Hi,
    Fantastic post, wonderful breakdowns . Simply put ………. Very useful . Thanks heaps for sharing your experiences and knowledge.

    ReplyDelete