Behavioral Finance Understanding Improves Portfolio Performance

Read Dr. Howard's FA news article reprint of "Behavioral Finance Understanding Improves Portfolio Performance" for a concise introduction to Behavioral Portfolio Management.

Introduction

Behavioral Portfolio Management (BPM) is based on two distinct market participants: emotional crowds and empirical investors. Emotional crowds make decisions based on limited information and emotional reactions to unfolding events. Human evolution hardwires us for short-term myopic loss aversion and social validation. These survival instincts drive irrational investment decisions and emotional crowds. On the other hand, behavioral research-driven empirical investors thoroughly analyze behavioral factors and look for the resulting price distortions in the market and build portfolios around them.

Article Reprint

Download the FA news BPM Article

FA news BPM Article
C. Thomas Howard, PhD


FA news BPM Article

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