Investing Psychology + Website – The Effects of Behavioral Finance on Investment Choice and Bias

<p>Preface xiii</p>
<p>CHAPTER 1 Sensory Finance 1</p>
<p>Beating the Bias Blind Spot 1</p>
<p>Illusory Pattern Recognition 4</p>
<p>Superstitious Pigeons and Investors 6</p>
<p>The Super Bowl Effect: If It Looks Too Good to Be True, It Is 9</p>
<p>Your Financial Horoscope: Forecasting and the Barnum Effect 10</p>
<p>Uncertainty: The Unknown Unknowns 12</p>
<p>Illusion of Control 13</p>
<p>Stocks Aren t Snakes 15</p>
<p>Herding 16</p>
<p>Availability 19</p>
<p>Assuming the Serial Position 21</p>
<p>Hot Hands 23</p>
<p>Financial Memory Syndrome 25</p>
<p>Attention! 27</p>
<p>The Problem with Linda 29</p>
<p>Representation 31</p>
<p>The Seven Key Takeaways 33</p>
<p>Notes 34</p>
<p>CHAPTER 2 Self–Image and Self–Worth 37</p>
<p>The Introspection Illusion 37</p>
<p>Blind Spot Bias, Revisited 39</p>
<p>Rose–Colored Investing 40</p>
<p>Past and Present Failures 41</p>
<p>Depressed but Wealthy 43</p>
<p>Disposed to Lose Money 44</p>
<p>Loss Aversion 45</p>
<p>Anchored 46</p>
<p>Two Strangers 48</p>
<p>Hindsight s Not So Wonderful 50</p>
<p>Deferral to Authority 51</p>
<p>Emotion 52</p>
<p>Black Swans 54</p>
<p>Dirty Money, Mental Accounting 55</p>
<p>A Faint Whisper of Emotion 56</p>
<p>Psychologically Numbed 57</p>
<p>Martha Stewart s Biases 58</p>
<p>Retrospective 60</p>
<p>Annual Returns 60</p>
<p>Nudged 61</p>
<p>Mindfulness 62</p>
<p>The Seven Key Takeaways 65</p>
<p>Notes 66</p>
<p>CHAPTER 3 Situational Finance 69</p>
<p>Disposition vs. Situation 69</p>
<p>Beauty Is in the Eye of the Investor 70</p>
<p>Angels or Demons? 71</p>
<p>Merely Familiar 73</p>
<p>Lemming Time 74</p>
<p>Story Time 76</p>
<p>Wise Crowds? 78</p>
<p>Adaptive Markets 79</p>
<p>George Soros s Refl exivity 81</p>
<p>Grow Old Quickly 82</p>
<p>Speaking Ill 83</p>
<p>The Power of Persuasion 85</p>
<p>SAD Investors 86</p>
<p>Sell in May . . . 87</p>
<p>The Mystery of the Vanishing Anomalies 89</p>
<p>Tweet and Invest 90</p>
<p>Fire! 92</p>
<p>The Rise of the Machines 93</p>
<p>The Seven Key Takeaways 94</p>
<p>Notes 95</p>
<p>CHAPTER 4 Social Finance 99</p>
<p>Conform or Die 99</p>
<p>Groupthink 100</p>
<p>Motivated Reasoning 101</p>
<p>Polarized 103</p>
<p>A Personal Mission Statement: Social</p>
<p>Identity and Beyond 104</p>
<p>Gaming the System 106</p>
<p>You ve Been Framed 108</p>
<p>Behavioral Portfolios 110</p>
<p>Dividend Dilemmas 112</p>
<p>The Language of Lucre 113</p>
<p>Embedded Investing 114</p>
<p>Financial Theory of Mind 116</p>
<p>Trust Me, Reciprocally . . . 118</p>
<p>Akerlof s Lemons 119</p>
<p>The Peacock s Tail 122</p>
<p>Facebooked 123</p>
<p>Be Kind to an Old Person 124</p>
<p>The Seven Key Takeaways 126</p>
<p>Notes 127</p>
<p>CHAPTER 5 Professional Bias 131</p>
<p>Mutual Fund Madness 131</p>
<p>Is Passive Persuasive? 133</p>
<p>Losing to the Dark Side 134</p>
<p>Forecasting The Butterfl y Effect 136</p>
<p>Forecaster Bias 138</p>
<p>Feminine Finance 140</p>
<p>Trading on a High 141</p>
<p>Marriage and Money 142</p>
<p>Muddled Modelers 144</p>
<p>CEO Pay Because They re Worth It? 145</p>
<p>Corporate Madness 146</p>
<p>Buyback Brouhaha 148</p>
<p>Oh No, IPO 149</p>
<p>Your 6 Percent Self–Infl icted Trading Tax 150</p>
<p>Expert Opinion? 151</p>
<p>Avoid the Sharpshooters 153</p>
<p>The Seven Key Takeaways 154</p>
<p>Notes 154</p>
<p>CHAPTER 6 Debiasing 159</p>
<p>Numbers, Numbers, Numbers 159</p>
<p>Losing Momentum 160</p>
<p>Mean Reversion 162</p>
<p>Short Shift 163</p>
<p>Diworsification 165</p>
<p>Disconfirm, Disconfi rm 167</p>
<p>Reverse Polarization 168</p>
<p>Expected Value 170</p>
<p>Investing in the Rearview Mirror 172</p>
<p>Living with Uncertainty 174</p>
<p>Sunk by the Titanic Effect 175</p>
<p>Changing Your Mind 177</p>
<p>Love Your Kids, Not Your Stocks 178</p>
<p>Cognitive Repairs 180</p>
<p>Satisficing 181</p>
<p>The Seven Key Takeaways 182</p>
<p>Notes 183</p>
<p>CHAPTER 7 Good Enough Investing 187</p>
<p>#1: The Rule of Seven 187</p>
<p>#2: Homo Sapiens, Tool Maker 188</p>
<p>#3: Meta–Methods 189</p>
<p>#4: Be Skeptical 189</p>
<p>#5: Don t Trust Yourself 190</p>
<p>#6: Self–Control Is Key 191</p>
<p>#7: Get Feedback 191</p>
<p>A Behavioral Investing Framework 192</p>
<p>Step #1: Making It Personal 193</p>
<p>Step #2: Build an Investing Checklist 195</p>
<p>Step #3: Write It Down 196</p>
<p>Step #4: Diarize Reviews 197</p>
<p>Step #5: Get Feedback 198</p>
<p>Step #6: Do Autopsies 199</p>
<p>Step #7: Update Adaptively 200</p>
<p>The Worst Offenders 201</p>
<p>Tools 203</p>
<p>The Mechanics of Investing 204</p>
<p>The Seven Key Takeaways 206</p>
<p>Notes 207</p>
<p>CHAPTER 8 A Few Myths More 209</p>
<p>Myth 1: Money Makes Us Happy 210</p>
<p>Myth 2: Everyone Can Be a Good Investor 211</p>
<p>Myth 3: Numbers Don t Matter 212</p>
<p>Myth 4: Financial Education Can Make You a Good Investor 213</p>
<p>Myth 5: I Won t Panic 214</p>
<p>Myth 6: Debt Doesn t Matter 215</p>
<p>Myth 7: I Can Get 7 Percent a Year from Markets 216</p>
<p>Myth 8: Infl ation Doesn t Matter 217</p>
<p>Myth 9: Everyone Has Some Good Investing Ideas, Sometime 217</p>
<p>Myth 10: I Don t Need to Track My Results 218</p>
<p>The Seven Key Takeaways 219</p>
<p>Notes 219</p>
<p>CHAPTER 9 The Final Roundup 221</p>
<p>Notes 224</p>
<p>About the Companion Website 227</p>
<p>About the Author 229</p>
<p>Index 231</p>