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The Behavioral Investor Hardcover – October 16, 2018
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From the New York Times bestselling author of the book named the best investment book of 2017 comes The Behavioral Investor, an applied look at how psychology ought to inform the art and science of investment management.
In The Behavioral Investor, psychologist and asset manager Dr. Daniel Crosby examines the sociological, neurological and psychological factors that influence our investment decisions and sets forth practical solutions for improving both returns and behavior. Readers will be treated to the most comprehensive examination of investor behavior to date and will leave with concrete solutions for refining decision-making processes, increasing self-awareness and constraining the fatal flaws to which most investors are prone.
The Behavioral Investor takes a sweeping tour of human nature before arriving at the specifics of portfolio construction, rooted in the belief that it is only as we come to a deep understanding of “why” that we are left with any clue as to “how” we ought to invest. The book is comprised of three parts, which are as follows:
- Part One – An explication of the sociological, neurological and physiological impediments to sound investment decision-making. Readers will leave with an improved understanding of how externalities impact choices in nearly imperceptible ways and begin to understand the impact of these pressures on investment selection.
- Part Two – Coverage of the four primary psychological tendencies that impact investment behavior. Although human behavior is undoubtedly complex, in an investment context our choices are largely driven by one of the four factors discussed herein. Readers will emerge with an improved understanding of their own behavior, increased humility and a lens through which to vet decisions of all types.
- Part Three – Illuminates the “so what” of Parts One and Two and provides a framework for managing wealth in a manner consistent with the realities of our contextual and behavioral shortcomings. Readers will leave with a deeper understanding of the psychological underpinnings of popular investment approaches such as value and momentum and appreciate why all types of successful investing have psychology at their core.
Wealth, truly considered, has at least as much to do with psychological as financial wellbeing. The Behavioral Investor aims to enrich readers in the most holistic sense of the word, leaving them with tools for compounding both wealth and knowledge.
- Print length280 pages
- LanguageEnglish
- PublisherHarriman House
- Publication dateOctober 16, 2018
- Dimensions5.8 x 0.85 x 8.75 inches
- ISBN-100857196863
- ISBN-13978-0857196866
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Editorial Reviews
Review
“'The Behavioral Investor' is Daniel Crosby's brilliant new book which looks at how professional investors can improve and enhance their performance by better understanding the way their brains influence their behaviours and affects their investment practice.” ―Steven Goldstein, Senior Managing Director, Alpha R Cubed
“...a useful summary of an increasingly important field of investing. Our brains have not evolved fast enough to make us expert in many investment decisions, and being aware of these short-comings may help us, not to knock it out of the park as investors, but to avoid various more obvious mistakes that can often hurt our wealth.” ―Simon Moore, Chief Investment Officer at Moola and contributor to Forbes
“Crosby’s book is eminently readable, with ample stories and studies...the book offers the reader valuable lessons in creating a portfolio that can, at least in part, circumvent the most pervasive behavioral pitfalls.” ―Brenda Jubin, Reading the Markets blog
“...Crosby is a master of his craft, a great storyteller as well as an academic, who can explain sometimes difficult concepts in simple terms and support his arguments with thought-provoking and entertaining commentary.” ―Richard Gill, CFA and contributor to Master Investor
“Rather arrogantly, I thought I knew everything there was to know about behavioural finance. After reading 'The Behavioural Investor' I realise I was wrong (ironically arrogance is one of the cognitive flaws that Dr Crosby writes about in his excellent book!).” ―Robert Carver, author 'Smart Portfolios' and visiting lecturer at Queen Mary, University of London
“For fans of behavioral finance Crosby's book is a must to add to your collection. For neophytes it's a great introduction.” ―Larry Swedroe, Author and Director of Research , The BAM Alliance
About the Author
Product details
- Publisher : Harriman House; 1st edition (October 16, 2018)
- Language : English
- Hardcover : 280 pages
- ISBN-10 : 0857196863
- ISBN-13 : 978-0857196866
- Item Weight : 1.2 pounds
- Dimensions : 5.8 x 0.85 x 8.75 inches
- Best Sellers Rank: #454,387 in Books (See Top 100 in Books)
- #611 in Investment Analysis & Strategy
- #687 in Stock Market Investing (Books)
- #1,323 in Introduction to Investing
- Customer Reviews:
About the author
Educated at Brigham Young and Emory Universities, Dr. Daniel Crosby is a psychologist, behavioral finance expert and asset manager who applies his study of market psychology to everything from financial product design to security selection. He is co-author of the New York Times bestseller Personal Benchmark: Integrating Behavioral Finance and Investment Management and founder of Nocturne Capital. He is at the forefront of behavioralising finance. His ideas have appeared in the Huffington Post and Risk Management Magazine, as well as his monthly columns for WealthManagement.com and Investment News.
Daniel was named one of the "12 Thinkers to Watch" by Monster.com, a "Financial Blogger You Should Be Reading" by AARP and in the "Top 40 Under 40" by Investment News. When he is not consulting around market psychology, Daniel enjoys independent films, fanatically following St. Louis Cardinals baseball, and spending time with his wife and three children.
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Full disclosure: I read several reviews and found these phrases to be the one’s I echo:
“The first half gives a background and the second half applies the learnings in real life.”
“He breaks down the essentials in a clear, easy to understand framework and avoids the pomp and ego that often accompany books written by academics with advanced degrees.”
“The author is well read in both academic literature and more practical investing books. Despite the author’s learnedness the language is very readable and clear as Crosby’s writing comes with a humorous and personal touch.”
The book is fantastic. It’s entertaining and very well done. Truth be told…I will not lend mine out but I have bought copies for friends, colleagues and clients.
Some fifteen years ago I fell in love with behavioral finance as it so obviously described aspects of investing and financial markets that traditional finance and economics didn’t. Over time the interest has however started to wane since the academics in the area devoted their energy towards adding yet another insult towards the previously dominant efficient market hypothesis creating an ever growing list of interesting and quirky behavioral biases but no real practical applications for investors. According to the author “[…] all this ends today, as we will take [these biases] and speak to the particulars of what they mean in the context of making money.” I would argue that the aim of being the most comprehensive guide is reasonably well met for a book of “only” about 250 pages. With regards to fulfilling my wish of an applied behavioral finance investment method The Behavioral Investor unfortunately only gives fairly broad guidelines.
The author is well read in both academic literature and more practical investing books. Despite the author’s learnedness the language is very readable and clear as Crosby’s writing comes with a humorous and personal touch. This is a finance book without most of the technical finance jargon – although at times it instead contains some psychology terminology. Nevertheless, it’s undoubtedly a very readable book.
The book is structured in four parts with the first outlining the sociological, neurological and physiological foundations to the biases investors exhibit. Then the author summarizes the many documented psychotically based follies of investors into four primary tendencies regarding ego, conservatism, attention and emotion. Part three tries to list practical measures to overcome the previously described problems and finally the book ends with the author’s “third way” of investing (as opposed to passive investing and active investing) called rules-based behavioral investing (RBI). Hence, the first half gives a background and the second half tries to apply the learnings in real life. Throughout The Behavioral Investor Crosby discusses most of all the psychological experiments and subsequent findings that a frequent reader of behavioral finance literature will ever have heard of but without it ever getting tedious.
RBI is as the name suggests rules based with a high base allocation to equities implemented through a combination of value and momentum quant based equity portfolios and with an overlay of valuation (Tobin’s Q, CAPE etc.) and momentum (200-day or 10 month moving averages etc.) based rules for when to very occasionally lower the allocation of equities. The focus is to find a rational and evidence based methodology where the room for behavioral biases is kept to a minimum. Although this is only one of several good ways to manage money I personally think this is a great setup, but regrettably Cosby only gives a very fleeting description of what his RBI actually looks like. Further, the Achilles heal of the rational quantitative strategy is that it needs permanent money or else it will suffer redemptions at the exact wrong moment from its less than rational human investors.
If this is one of the first books you read on behavioral finance you are to be congratulated as it will surely be mind-blowing. If you have followed the area during its development, The Behavioral Investor is a very good inventory of current knowledge but it adds relatively little new. And perhaps it’s a good thing that a best selling book cannot deliver a detailed best practice behavioral finance investing method as it is then up to me to develop it myself.
This is a review by investingbythebooks.com
Top reviews from other countries
I have been investing for 8 years, and I am now equipped with new, humbling knowledge that will undoubtedly inform my approaches to investing and my understanding of money.
Traditionally good investment has been based on:
(1) sensible asset allocation; diversity
(2) use of Fundamental Analysis to identify what stocks to buy
(3) use of Technical Analysis to identify when to buy and sell.
To this we can add the need for the investor to understand his own mind and emotions when administering a portfolio. The best scientific skills can be swept away if you sell in panic when prices fall.
This book explains why the average intelligent person can be unsuited to coping with financial markets; and then explores how you can compensate for this. Put over simply: identify your rules and keep to them.
Well worth reading; if then you use the learning.