You are here: Knowledge Center Reading Room

Investor Psychology Behavioral Finance

E-mail Print PDF

There are many well-documented behavioral phenomena which often conspire to rob investors of investment performance.  Being aware of them may help you to steer clear of them.

H. Kent Baker and John F. Nofsinger, "Psychological Biases of Investors," Financial Services Review, 11(2) Summer 2002, pp. 97-116. A survey of these issues.

Brad M. Barber and Terrance Odean, “Trading is Hazardous to your Wealth: The Common Stock Investment Performance of Individual Investors,” Journal of Finance,  April 2000 Vol 60 No 2, pp. 773-806 (262kb). Also SSRN Working Paper 219228 (263kb).

Brad M. Barber, Terrance Odean, and Lu Zheng, "The Behavior of Mutual Fund Investors," September 2000 (227kb).

Brad M. Barber and Terrance Odean, "The Courage of Misguided Convictions: The Trading Behavior of Individual Investors,"  Financial Analysts Journal, NovemberDecember 1999, pp. 41-55 (208kb). Also SSRN Working Paper 219175 (143kb).

Nicholas Barberis and Richard Thaler, "A Survey of Behavioral Finance," Chapter 18 of Handbook of the Economics of Finance, September 2003.

Shlomo Benertzi and Richard H. Thaler, "Myopic Loss Aversion and the Equity Premium Puzzle," Quarterly Journal of Economics, February 1995, pp. 73-92 (1.82mb). Also here (1.82mb). This paper coined the term "myopic loss aversion."  It refers to the tendency to be unusually sensitive to short term losses, relative to short term gains.

Werner F. M. De Bondt and Richard H. Thaler, "Does the Stock Market Overreact?," Journal of Finance, July 1985, pp. 793-805 (1.5mb).

Justin Fox, "Is the Market Rational?," Fortune, December 9 2002. A good even-handed discussion of the Efficient Market vs. Behavioral debate.

Back to Reading Room

Russell J. Fuller, "Behavioral Finance and the Sources of Alpha,"  Journal of Pension Plan Investing, Winter 1998 (51kb).

Back to Reading Room