"You don't get rich by what you earn. You get rich by what you don't spend." (Henry Ford) Why are some people wealthier and better off than others? Given similar income levels, what predicts who will build greater wealth? Why are people of the same age and similar background factors so different in their wealth… Continue reading Can your habits and attitudes make you wealthy?
On holding losers and selling winners: our emotional brains and the disposition effects
I am delighted to introduce a guest blog by Dr Daniel Richards about some research we collaborated on. The disposition effect describes a bias that causes investors to be more willing to sell investments that have risen in in value than those that have fallen in value. Our research shows that investors who rely less on emotions and intuition and investors who manage their emotions more effectively are less likely to show this investment bias.
Different Minds: why we need human capabilities and machine intelligence*
“There have been great societies that did not use the wheel, but there have been no societies that did not tell stories.” —Ursula K. LeGuin To listen to some scholars of decision-making, it is a great wonder that humans have survived as long as they have. We are constantly prone to biases, rely on simplistic… Continue reading Different Minds: why we need human capabilities and machine intelligence*
‘The heart has its reasons’: emotions and cognition in the world of finance
Let’s call him James, a trader in a City investment bank; young, smartly dressed, confident, and a little impatient. He sat across from me in the interview: “It’s really important to stay cool. For myself, I can say that I really don’t have much emotion while I trade”. Half an hour later, as he relaxed… Continue reading ‘The heart has its reasons’: emotions and cognition in the world of finance
Interview on Share Radio
On fund-managers, rats and hermit crabs: reversion to familiar habits under stress
Hermit crabs rely on acquiring discarded shells for their protection and are constantly on the look-out for better shells. However, faced with environmental stress they prefer to stick with their old shell, however unsuitable, than risk moving to a new one[i]. Experiments with rats show that under stress habitual behaviour persists longer in the face… Continue reading On fund-managers, rats and hermit crabs: reversion to familiar habits under stress
Investment, Emotions and the Temple at Delphi*
Can understanding the psychology of investment behaviour help you outperform the market? Probably not, but it can certainly help reduce the probability that you will under-perform the market. This matters, because the majority of private investors under-perform. One compelling piece of research evidence comes from a careful analysis, carried out by Dalbar research, of the… Continue reading Investment, Emotions and the Temple at Delphi*
Emotions and financial trading
https://www.youtube.com/watch?v=8LnsfdCIHlA Mark Fenton-O'Creevy and David Jones of IG Index discuss emotions and trading at the London Stock Exchange