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People tend to be penny wise and pound foolish and cry over spilt milk, even though we are taught to do neither. Focusing on the present at the expense of the future and basing decisions on lost value are two mistakes common to decision-making that are particularly costly in the world of finance.

Behavioral Finance: What Everyone Needs to KnowR provides an overview of common shortcuts and mistakes people make in managing their finances. It covers the common cognitive biases or errors that occur when people are collecting, processing, and interpreting information. These include emotional biases and the influence of social factors, from culture to the behavior of one's peers. These effects vary during one's life, reflecting differences in due to age, experience, and gender.

Among the questions to be addressed are: How did the financial crisis of 2007-2008 spur understanding human behavior? What are market anomalies and how do they relate to behavioral biases? What role does overconfidence play in financial decision- making? And how does getting older affect risk tolerance? Behavioral Finance is a compact and useful overview of this important, comparatively new sub-field of finance and an excellent resource for practitioners wanting to refresh or deepen their understanding. * Enterprising Investor * If you are looking for a book that explains behavioral finance in plain understandable language, then this book is for you. This book adeptly applies the classic Socratic method to explain why the behavioral approach better explains the behavior of normal people than the neoclassical approach. * Hersh Shefrin, Mario L. Belotti Professor of Finance, Santa Clara University *

Behavioral Finance: What Everyone Needs to Know (R)

Chapter 1. Foundations and Psychological Concepts

Chapter 2. Cognitive Biases

Chapter 3. Emotional Biases and Social/Cultural Influences

Chapter 4. Investor Behavior

Chapter 5. Nudge: The Influence of Frame Dependence

Chapter 6. Cognitive Ability



Notes

Index