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.

Whether the developing field of behavioral finance will improve the investment results of the average investor is open to question.  However, the intellectual framework at least recognizes the influence of human emotion rather than the obviously false idea that investors are purely rational actors operating in an “efficient market”.

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The Economist on Behavioral Finance
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