Behavioral Finance and Wealth Management : How to Build Optimal Portfolios That Account for Investor Biases.

By: Pompian, Michael MContributor(s): Pompian, MichaelMaterial type: TextTextSeries: Wiley Finance SerPublisher: Somerset : John Wiley & Sons, Incorporated, 2011Copyright date: ©2012Edition: 2nd edDescription: 1 online resource (352 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9781118182277Subject(s): Investments -- Decision making | Investments -- Psychological aspectsGenre/Form: Electronic books.Additional physical formats: Print version:: Behavioral Finance and Wealth Management : How to Build Optimal Portfolios That Account for Investor BiasesDDC classification: 332.601/9 LOC classification: HG4515.15 -- .P66 2012ebOnline resources: Click to View
Contents:
Intro -- Behavioral Finance and Wealth Management -- Preface -- Acknowledgments -- PART ONE Introduction to Behavioral Finance -- CHAPTER 1 What Is Behavioral Finance? -- Behavioral Finance: The Big Picture -- Standard Finance versus Behavioral Finance -- The Role of Behavioral Finance with Private Clients -- How Practical Application of Behavioral Finance Can Create a Successful Advisory Relationship -- Notes -- CHAPTER 2 The History of Behavioral Finance Micro -- Historical Perspective on the Link between Psychology and Economics -- Modern Behavioral Finance -- Psychographic Models Used in Behavioral Finance -- Notes -- CHAPTER 3 Introduction to Behavioral Biases -- Introduction -- Behavioral Biases Defined -- Why Understanding and Identifying Behavioral Biases Is Important -- Categorization of Behavioral Biases -- Differences between Cognitive and Emotional Biases -- Difference among Cognitive Biases -- Emotional Biases -- A Final Word on Biases -- Summary of Part One -- PART TWO Belief Perseverance Biases Defined and Illustrated -- CHAPTER 4 Cognitive Dissonance Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Conclusion -- Notes -- CHAPTER 5 Conservatism Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 6 Confirmation Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 7 Representativeness Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 8 Illusion of Control Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Final Thought -- Notes -- CHAPTER 9 Hindsight Bias -- Bias Description -- Practical Application -- Research Review.
Diagnostic Testing -- Advice -- Notes -- PART THREE Information Processing Biases Defined and Illustrated -- Overview of the Structure of Chapters 10 through 16 -- CHAPTER 10 Mental Accounting Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- The Behavioral Finance Approach to Asset Allocation based on Mental Accounting -- Notes -- CHAPTER 11 Anchoring and Adjustment Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Bonus Discussion: Investment Strategies that Leverage Anchoring and Adjustment Bias -- Notes -- CHAPTER 12 Framing Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 13 Availability Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Test -- Advice -- Notes -- CHAPTER 14 Self-Attribution Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 15 Outcome Bias -- Bias Description -- Diagnostic -- Notes -- CHAPTER 16 Recency Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- PART FOUR Emotional Biases Defined and Illustrated -- CHAPTER 17 Loss Aversion Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 18 Overconfidence Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- A Final Word on Overconfidence -- Notes -- CHAPTER 19 Self-Control Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 20 Status Quo Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes.
CHAPTER 21 Endowment Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 22 Regret Aversion Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 23 Affinity Bias -- Bias Description -- Research Review -- Diagnostic Testing -- Advice -- Notes -- PART FIVE Application of Behavioral Finance to Asset Allocation and Case Studies -- CHAPTER 24 Application of Behavioral Finance to Asset Allocation -- Practical Application of Behavioral Finance -- Best Practical Allocation -- Guidelines for Determining Best Practical Asset Allocation -- Quantitative Guidelines for Incorporating Behavioral Finance in Asset Allocation -- Investment Policy and Asset Allocation -- Notes -- CHAPTER 25 Case Studies -- Case Study A: Mr. Nicholas -- Case Study B: Mrs. Alexander -- Summary of Case Studies -- PART SIX Behavioral Investor Types -- CHAPTER 26 Behavioral Investor Type Diagnostic Process -- Background of the Development of Behavioral Investor Types -- Psychographic Models of Investor Behavior -- Early Psychographic Models -- The Behavioral Alpha Process: A Top-Down Approach -- The BIT Identification Process -- Summary -- Notes -- CHAPTER 27 Behavioral Investor Types -- Introduction -- Preserver -- Follower -- Independent -- Accumulator -- Summary -- Index.
Summary: The book that applies behavioral finance to the real world Understanding how to use behavioral finance theory in investing is a hot topic these days. Nobel laureate Daniel Kahneman has described financial advising as a prescriptive activity whose main objective should be to guide investors to make decisions that serve their best interests. The reality? That's easier said than done. In the Second Edition of Behavioral Finance and Wealth Management, Michael Pompian takes a practical approach to the growing science of behavioral finance, and puts it to use for real investors. He applies knowledge of 20 of the most prominent individual investor biases into "behaviorally-modified" asset allocation decisions. Offering investors and financial advisors a "self-help" book, Pompian shows how to create investment strategies that leverage the latest cutting edge research into behavioral biases of individual investors. This book: Shows investors and financial advisors how to either moderate or adapt to behavioral biases, in order to improve investment results and identifies "the best practical allocation" for investment portfolios. Using these two sound approaches for guiding investment decision-making, behavioral biases are incorporated into the portfolio management process Uses updated cases studies to show investors and financial advisors how an investor's behavior can be modified to improve investment decision-making Provides useable methods for creating behaviorally modified investment portfolios, which may help investors to reach their long term financial goals Heightens awareness of biases so that financial decisions and resulting economic outcomes are improved Offers advice on managing the effects of each bias in order to improve investment results This Second Edition illustrates investors' behavioral biases in detail and offers financial advisors andSummary: their clients practical advice about how to apply the science of behavioral finance to improve overall investment decision making.
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Intro -- Behavioral Finance and Wealth Management -- Preface -- Acknowledgments -- PART ONE Introduction to Behavioral Finance -- CHAPTER 1 What Is Behavioral Finance? -- Behavioral Finance: The Big Picture -- Standard Finance versus Behavioral Finance -- The Role of Behavioral Finance with Private Clients -- How Practical Application of Behavioral Finance Can Create a Successful Advisory Relationship -- Notes -- CHAPTER 2 The History of Behavioral Finance Micro -- Historical Perspective on the Link between Psychology and Economics -- Modern Behavioral Finance -- Psychographic Models Used in Behavioral Finance -- Notes -- CHAPTER 3 Introduction to Behavioral Biases -- Introduction -- Behavioral Biases Defined -- Why Understanding and Identifying Behavioral Biases Is Important -- Categorization of Behavioral Biases -- Differences between Cognitive and Emotional Biases -- Difference among Cognitive Biases -- Emotional Biases -- A Final Word on Biases -- Summary of Part One -- PART TWO Belief Perseverance Biases Defined and Illustrated -- CHAPTER 4 Cognitive Dissonance Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Conclusion -- Notes -- CHAPTER 5 Conservatism Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 6 Confirmation Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 7 Representativeness Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 8 Illusion of Control Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Final Thought -- Notes -- CHAPTER 9 Hindsight Bias -- Bias Description -- Practical Application -- Research Review.

Diagnostic Testing -- Advice -- Notes -- PART THREE Information Processing Biases Defined and Illustrated -- Overview of the Structure of Chapters 10 through 16 -- CHAPTER 10 Mental Accounting Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- The Behavioral Finance Approach to Asset Allocation based on Mental Accounting -- Notes -- CHAPTER 11 Anchoring and Adjustment Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Bonus Discussion: Investment Strategies that Leverage Anchoring and Adjustment Bias -- Notes -- CHAPTER 12 Framing Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 13 Availability Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Test -- Advice -- Notes -- CHAPTER 14 Self-Attribution Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 15 Outcome Bias -- Bias Description -- Diagnostic -- Notes -- CHAPTER 16 Recency Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- PART FOUR Emotional Biases Defined and Illustrated -- CHAPTER 17 Loss Aversion Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 18 Overconfidence Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- A Final Word on Overconfidence -- Notes -- CHAPTER 19 Self-Control Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 20 Status Quo Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes.

CHAPTER 21 Endowment Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 22 Regret Aversion Bias -- Bias Description -- Practical Application -- Research Review -- Diagnostic Testing -- Advice -- Notes -- CHAPTER 23 Affinity Bias -- Bias Description -- Research Review -- Diagnostic Testing -- Advice -- Notes -- PART FIVE Application of Behavioral Finance to Asset Allocation and Case Studies -- CHAPTER 24 Application of Behavioral Finance to Asset Allocation -- Practical Application of Behavioral Finance -- Best Practical Allocation -- Guidelines for Determining Best Practical Asset Allocation -- Quantitative Guidelines for Incorporating Behavioral Finance in Asset Allocation -- Investment Policy and Asset Allocation -- Notes -- CHAPTER 25 Case Studies -- Case Study A: Mr. Nicholas -- Case Study B: Mrs. Alexander -- Summary of Case Studies -- PART SIX Behavioral Investor Types -- CHAPTER 26 Behavioral Investor Type Diagnostic Process -- Background of the Development of Behavioral Investor Types -- Psychographic Models of Investor Behavior -- Early Psychographic Models -- The Behavioral Alpha Process: A Top-Down Approach -- The BIT Identification Process -- Summary -- Notes -- CHAPTER 27 Behavioral Investor Types -- Introduction -- Preserver -- Follower -- Independent -- Accumulator -- Summary -- Index.

The book that applies behavioral finance to the real world Understanding how to use behavioral finance theory in investing is a hot topic these days. Nobel laureate Daniel Kahneman has described financial advising as a prescriptive activity whose main objective should be to guide investors to make decisions that serve their best interests. The reality? That's easier said than done. In the Second Edition of Behavioral Finance and Wealth Management, Michael Pompian takes a practical approach to the growing science of behavioral finance, and puts it to use for real investors. He applies knowledge of 20 of the most prominent individual investor biases into "behaviorally-modified" asset allocation decisions. Offering investors and financial advisors a "self-help" book, Pompian shows how to create investment strategies that leverage the latest cutting edge research into behavioral biases of individual investors. This book: Shows investors and financial advisors how to either moderate or adapt to behavioral biases, in order to improve investment results and identifies "the best practical allocation" for investment portfolios. Using these two sound approaches for guiding investment decision-making, behavioral biases are incorporated into the portfolio management process Uses updated cases studies to show investors and financial advisors how an investor's behavior can be modified to improve investment decision-making Provides useable methods for creating behaviorally modified investment portfolios, which may help investors to reach their long term financial goals Heightens awareness of biases so that financial decisions and resulting economic outcomes are improved Offers advice on managing the effects of each bias in order to improve investment results This Second Edition illustrates investors' behavioral biases in detail and offers financial advisors and

their clients practical advice about how to apply the science of behavioral finance to improve overall investment decision making.

Description based on publisher supplied metadata and other sources.

Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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