The Economist on Behavioral Finance

As a follow up to yesterday’s article on behavioral finance, it is worth listening to the views of Greg Davies, the head of Behavioral Finance at Barclays. In the “Tea with the Economist” segment shown below, Mr. Davies discusses common psychological tendencies of investors particularly with respect to risk and aversion to loss.

Behavioral Finance and Value Investors

Santa Clara University Professor Meir Statman wrote an interesting story on behavioral finance for today’s Wall Street Journal. The Mistakes We Make—and Why We Make Them focuses on eight key mistakes that investors typically make particularly when coming to terms with unrealized losses in their portfolios. Although most value investors already recognize these behavioral tendencies and have an investment framework equipped to counter the worst of these psychological impulses, all investors are subject to emotion and are well served to keep the subject of behavioral finance in mind.

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