Behavioral Finance and Wealth Management
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Behavioral
Finance and
Wealth
Management
How to Build Optimal Portfolios That
Account for Investor Biases
MICHAEL M. POMPIAN
What Is Behavioral Finance?
People in standard finance are rational. People in behavioral
finance are normal.
—Meir Statman, Ph.D., Santa Clara University
To those for whom the role of psychology in finance is self-evident,
both as an influence on securities markets fluctuations and as a force
guiding individual investors, it is hard to believe that there is actually a
debate about the relevance of behavioral finance. Yet many academics
and practitioners, residing in the “standard finance” camp, are not con-
vinced that the effects of human emotions and cognitive errors on fi-
nancial decisions merit a unique category of study. Behavioral finance
adherents, however, are 100 percent convinced that an awareness of per-
tinent psychological biases is crucial to finding success in the investment
arena and that such biases warrant rigorous study.
Finance and
Wealth
Management
How to Build Optimal Portfolios That
Account for Investor Biases
MICHAEL M. POMPIAN
What Is Behavioral Finance?
People in standard finance are rational. People in behavioral
finance are normal.
—Meir Statman, Ph.D., Santa Clara University
To those for whom the role of psychology in finance is self-evident,
both as an influence on securities markets fluctuations and as a force
guiding individual investors, it is hard to believe that there is actually a
debate about the relevance of behavioral finance. Yet many academics
and practitioners, residing in the “standard finance” camp, are not con-
vinced that the effects of human emotions and cognitive errors on fi-
nancial decisions merit a unique category of study. Behavioral finance
adherents, however, are 100 percent convinced that an awareness of per-
tinent psychological biases is crucial to finding success in the investment
arena and that such biases warrant rigorous study.
