Ritholtz Says Stock-Picking is Still Alive if Not Kicking

Active fund management has been losing followers but isn’t going away entirely, writes Barry Ritholtz in a recent Bloomberg article. While stock-picking has seen a host of changes, he offers several insights as to “how we got here” including the following: Beating the market is tougher than most people thought, a notion that Ritholtz says […]

The Trading Effect

In psychology and behavioral economics, the endowment effect is the hypothesis that people assign more value to things they own. Past studies have shown that experienced securities traders are less susceptible to this bias but the reasons have been unclear. However, researchers at the University of Chicago recently published results of several experiments which suggest the cause, […]

Asness and Arnott Talk Market Timing, Smart Beta and Behavioral Biases

Maybe not always. At least that was the upshot of a debate between Cliff Asness of AQR and Rob Arnott of Research Affiliates, panelists at the recent Morningstar conference in Chicago. Although they debated various topics, they seemed to agree that value stocks deserve attention when they’re cheap. According to Asness, founder and managing principal […]

Understanding the Behavioral Continuum on Your Way to Becoming a Better Investor

Shreenivas Kunte, director of content at the CFA Institute, recently wrote about the Behavioral Continuum and how it affects our decision making process. He contends that “behavioral patterns extend across a wide continuum. On the darker side, they can generate negativity or lead to disaster. On the lighter side, they are useful, even essential.” Thus, […]

Emotions and Biases Play Huge Role in Bad Investment Decisions

In a recent New York Times article, columnist Gary Belsky observes that “the majority of cognitive biases and shortcuts that influence everyday judgement and choice have analogues in investment behavior.” In other words, insights from behavioral economics and finance explain why people don’t often behave rationally when investing. For example, amateur investors believe they can […]

How Your Brain Hurts Your Returns – And What You Can Do To Stop It

What’s the biggest obstacle to investment success? Validea’s John Reese says it may well be our own brains. “The capabilities of human beings’ brains are staggering,” Reese writes in his latest piece for Forbes.com. “Over the course of many millennia, the development of our brains has allowed us to outsmart dangerous predators, build enormous cities […]

How Your Brain Hurts Your Returns — And What You Can Do To Stop It

What’s the biggest obstacle to investment success? Validea’s John Reese says it may well be our own brains. “The capabilities of human beings’ brains are staggering,” Reese writes in his latest piece for Forbes.com. “Over the course of many millennia, the development of our brains has allowed us to outsmart dangerous predators, build enormous cities […]

Mauboussin: Understanding the Process Can Help Separate Luck and Skill in Investing

AAII editor Charles Rotblut, CFA, interviewed Michael Mauboussin, head of Global Financial Strategies at Credit Suisse, about the role of both luck and skill in investing (subscription required). According to Mauboussin, to separate skill from luck, you first have to look at the process that generates the output you are looking to achieve. In order […]