Guest Article: Meir Statman on Value Investing in Inefficient Markets

We are pleased to publish a guest article by Meir Statman, the author of What Investors Really Want. Professor Statman is a pioneer in the field of behavioral finance and his book should be required reading for anyone involved in financial markets. Whether an investor is “seeking alpha” or satisfied with the low cost approach of index funds, investing without a keen appreciation for the behavioral pitfalls that impact nearly all of us can be a costly mistake.

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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