The psychology of investing / John R. Nofsinger.

Format:

Book

Author/Creator:

Nofsinger, John R., 1965-

Language:

English

Subjects (All):

Investments--Psychological aspects.

Investments.

Physical Description:

xi, 95 pages : illustrations ; 23 cm

Place of Publication:

Upper Saddle River, N.J. : Prentice Hall, [2002]

Summary:

The first book of its kind to delve into the fascinating and important subject of the psychology affecting investment. No other book provides this information because traditional finance focuses on developing the tools in which investors use to optimize expected return and risk. The author believes that understanding the psychology of investing is just as important as knowing the traditional investment topics. Combines behavioral knowledge from psychology, management, marketing, economics, and finance. Uses investment as well as non investment examples. For financial planners, investment managers, individual investors, or to be used as a training manual or reference in financial companies.

Contents:

Chapter 1 Psychology and Finance 1

Prediction 3

Long Term Capital Management 5

Behavioral Finance 6

What to Expect 6

Chapter 2 Overconfidence 9

How Overconfidence Affects Investor Decisions 10

Overconfidence and Risk 14

Illusion of Knowledge 14

Illusion of Control 16

Online Trading 17

Online Trading and Performance 18

Chapter 3 Fear of Regret and Seeking Pride 21

Disposition Effect 21

Disposition Effect and Wealth 22

Tests of Avoiding Regret and Seeking Pride 23

The Market for Houses 25

Selling Winners Too Soon and Holding Losers Too Long 26

Disposition Effect and News 27

Reference Points 28

Chapter 4 Considering the Past 31

House Money Effect 31

Snake Bite (or Risk Aversion) 32

Trying to Break Even 32

Effect on Investors 33

Endowment (or Status Quo Bias) Effects 33

Endowment and Investors 34

Memory and Decision Making 35

Memory and Investment Decisions 36

Cognitive Dissonance 37

Cognitive Dissonance and Investing 38

Chapter 5 Mental Accounting 43

Mental Budgeting 44

Matching Costs to Benefits 44

Aversion to Debt 46

Sunk-Cost-Effect 46

Economic Impact 47

Mental Accounting and Investing 48

Chapter 6 Forming Portfolios 51

Modern Portfolio Theory 51

Mental Accounting and Portfolios 51

Perceptions on Risk 53

Risk Perception in the Real World 56

Building Behavioral Portfolios 56

Naive Diversification 58

Retirement Plans 59

Chapter 7 Representativeness and Familiarity 61

Representativeness 61

Representativeness and Investing 62

Familiarity 64

Familiarity Breeds Investment 65

Familiarity Breeds Investment Problems 67

Chapter 8 Investor Socialization and Mania 71

Sharing Investment Knowledge 71

Herding 72

Speed is of the Essence (Not!) 72

Investment Clubs 73

Market Mania 76

A Rose.com by Any Other Name 77

The More Things Change ... 78

Chapter 9 Self-Control and Decision Making 81

Short-Term versus Long-Term Focus 82

Controlling Yourself 82

Saving and Self-Control 83

401(k) and IRA Plans 84

Self Control and Dividends 85

Beating the Biases 87

Additional Rules of Thumb 90.

Notes:

Includes bibliographical references and index.

ISBN:

0130930245

OCLC:

47996038