Cover image for Beyond greed and fear : understanding behavioral finance and the psychology of investing
Title:
Beyond greed and fear : understanding behavioral finance and the psychology of investing
Author:
Shefrin, Hersh, 1948-
Personal Author:
Publication Information:
Boston, Mass. : Harvard Business School Press, [2000]

©2000
Physical Description:
x, 368 pages : illustrations ; 25 cm.
Language:
English
ISBN:
9780875848723
Format :
Book

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Summary

Summary

Even the best Wall Street investors make mistakes. No matter how savvy or experienced, all financial practitioners eventually let bias, overconfidence, and emotion cloud their judgement and misguide their actions. Yet most financial decision-making models fail to factor in these fundamentalsof human nature. In Beyond Greed and Fear, the most authoritative guide to what really influences the decision-making process, Hersh Shefrin uses the latest psychological research to help us understand the human behavior that guides stock selection, financial services, and corporate financialstrategy. Shefrin argues that financial practitioners must acknowledge and understand behavioral finance--the application of psychology to financial behavior--in order to avoid many of the investment pitfalls caused by human error. Through colorful, often humorous real-world examples, Shefrin pointsout the common but costly mistakes that money managers, security analysts, financial planners, investment bankers, and corporate leaders make, so that readers gain valuable insights into their own financial decisions and those of their employees, asset managers, and advisors. According to Shefrin,the financial community ignores the psychology of investing at its own peril. Beyond Greed and Fear illuminates behavioral finance for today's investor. It will help practitioners to recognize--and avoid--bias and errors in their decisions, and to modify and improve their overall investmentstrategies.


Author Notes

Hersh Shefrin holds the Mario L. Belotti Chair in Finance at the Leavey School of Business, Santa Clara University.


Reviews 2

Library Journal Review

Behavioral finance is defined by Shefrin (finance, Santa Clara Univ.) as "a rapidly growing area that deals with the influence of psychology on the behavior of financial practitioners." This comprehensive study is aimed primarily at practitionersÄportfolio managers, analysts, and financial advisersÄwho, according to Shefrin, "need to know that because of human nature, they make particular types of mistakes." Shefrin provides a historical background of finance theory, studies of behavioral analysis, and a review of major contributions to the literature. The book is divided into six parts: behavioral finance, the stock market, individual investors, money managers, corporate executives, and options, futures, and foreign exchange. In addition to numerous case studies, Shefrin utilizes statistical charts and tables to illustrate his central theories and concepts. Important and thought-provoking, this study is recommended for academic faculty and students as well as finance practitioners.ÄLucy T. Heckman, St. John's Univ. Lib., NY (c) Copyright 2010. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.


Choice Review

Behavioral finance applies psychology to financial decision making. Individual investors and even professional financial analysts and portfolio managers are subject to bias, incorrect perceptions, and overconfidence. Bias and incorrect perceptions may lead to over- or underpricing, and overconfidence often leads to inaccurate assessment of risk. Acknowledging these weaknesses may lead to better investment decisions. Sefrin's superb book, the first comprehensive treatment of the field of behavior finance, was originally published in 2000 by Harvard Business School Press (CH, May'00). This release by Oxford University Press is the same as the 2000 volume, except for a 30-page preface. Even the pagination is the same. The new preface covers the growth of the field and its increased acceptance in both the academic and professional community. New academic research on behavior finance is integrated through a chapter-by-chapter review in the preface. If a library owns the original book, there is little reason to acquire this edition. The reissuing, however, is an excellent opportunity for any library or investor to acquire what may be the best book on behavior finance. One edition of this work should be in every investment collection. ^BSumming Up: Highly recommended. Public, academic, and professional library collections. H. Mayo The College of New Jersey


Table of Contents

Prefacep. ix
Part I What Is Behavioral Finance?p. 1
Chapter 1 Introductionp. 3
Chapter 2 Heuristic-Driven Bias: The First Themep. 13
Chapter 3 Frame Dependence: The Second Themep. 23
Chapter 4 Inefficient Markets: The Third Themep. 33
Part II Predictionp. 43
Chapter 5 Trying to Predict the Marketp. 45
Chapter 6 Sentimental Journey: The Illusion of Validityp. 59
Chapter 7 Picking Stocks to Beat the Marketp. 69
Chapter 8 Biased Reactions to Earnings Announcementsp. 91
Part III Individual Investorsp. 105
Chapter 9 "Get-Evenitis": Riding Losers Too Longp. 107
Chapter 10 Portfolios, Pyramids, Emotions, and Biasesp. 119
Chapter 11 Retirement Saving: Myopia and Self-Controlp. 139
Part IV Institutional Investorsp. 157
Chapter 12 Open-Ended Mutual Funds: Misframing, "Hot Hands," and Obfuscation Gamesp. 159
Chapter 13 Closed-End Funds: What Drives Discounts?p. 175
Chapter 14 Fixed Income Securities: The Full Measure of Behavioral Phenomenap. 193
Chapter 15 The Money Management Industry: Framing Effects, Style "Diversification," and Regretp. 213
Part V The Interface between Corporate Finance and Investmentp. 225
Chapter 16 Corporate Takeovers and the Winner's Cursep. 227
Chapter 17 IPOs: Initial Underpricing, Long-term Underperformance, and "Hot-Issue" Marketsp. 239
Chapter 18 Optimism in Analysts' Earnings Predictions and Stock Recommendationsp. 257
Part VI Options, Futures, and Foreign Exchangep. 271
Chapter 19 Options: How They're Used, How They're Priced, and How They Reflect Sentimentp. 273
Chapter 20 Commodity Futures: Orange Juice and Sentimentp. 289
Chapter 21 Excessive Speculation in Foreign Exchange Marketsp. 299
Final Remarksp. 309
Notesp. 311
Referencesp. 333
Creditsp. 351
Indexp. 359