Читать книгу Behavioral Portfolio Management - C. Thomas Howard - Страница 5

Emotions play a central role in financial markets – this is an uncontroversial statement for most market participants. However, for some it borders on intellectual heresy. They argue that, while emotions are present, their impact is mitigated by the arbitrage activities of rational investors and thus markets correctly price assets. But markets do not correctly price assets and indeed emotions trump arbitrage. Emotion is the proverbial elephant in the room of financial theorists. It is time to elevate emotions to their proper place in the pantheon of factors to be considered when making investment decisions.

This book explores the role emotions play in every aspect of financial markets, from how huge sophisticated markets price securities, to the conventional wisdom doled out by investment professionals, to the investment decisions made by individuals and professionals. Over the last 40 years, numerous studies in behavioral science have increasingly challenged the notion of humans as rational decision-makers. It is startling how difficult it is to find any significant amount of rationality in these studies! Markets are human institutions, so it is not surprising they too are driven by emotional decision-making.

While emotions are the focus, the analysis presented in this book is quantitative and objective in nature. My own background is quantitative, with degrees in mechanical engineering, management science, and finance. So as it became increasingly apparent to me that emotions play a central role in how securities are priced, I turned my attention to the behavioral science literature and how the impact of emotions could be objectively measured. This is a quantitative process that leans on many of the careful statistical techniques in current use by academics and higher-level practitioners. Whenever possible, I support my conclusions with my own large sample statistical studies as well as those conducted by other academics.