I am strongly interested in behavioral finance.As a finance grad student and B.A.economics holder,which career path is most appropriate for me?I think trading might fit well.What are your suggestions?
I am not that hardworking and willing to work with low payment.Maybe if i earn enough to sponsor myself,i can go back to school and do my phd but not right now.
Behavioral Finance - Any funds that use the concept? (Originally Posted: 06/14/2010)
Are there any funds that use the concepts of behavioral finance as a strategy? If yes, would they be more likely to recruit people with a psychology background? I know JP Morgan had a few funds that focused on behavioral finance but I think that was in the 90s (there's an HBS case about them)
Most of the behavioral finance managers are more quantitative/systematic. Academic literature in behavioral finance is extremely data driven. Places like Fuller & Thaler, and LSV are essentially implementing what you find in behavioral finance papers - which involves a lot of programming and data mining.
The JPMorgan Asset Mgmt HBS case basically outlined a couple of quantitative funds and a marketing gimmick for private wealth clients.
Anyone here trade on a behavioral basis? Where do you get the strategies from if you do?
I was reading Watchmen the other day, and one of the things that was described in it (minimally) was Ozymandius in one of the later chapters when he was arriving at his place. Guy puts on a bunch of televisions in order to understand the mood of people. He then comes to the conclusion that certain ideas were becoming/going to become prevalent in general, from the tone of what he observed, and he then chose certain areas of the market which he thought would be getting growth because of those ideas.
Specifically, he sees that there is a trend towards more sexualization, aggressiveness and sentimentality in the media, which he attributed to a desire to remove the self from responsibility. He then suggests that this is due to the idea that a war is commonly predicted as happening, and that there will be an increase in reproduction as happened in other war times like the baby boom. He then decided to buy in to companies that produced devices for babies, baby food, and adult entertainment.
I think that a strategy can be made to approach to markets using this reasoning. Investing in BUD or ADR for instance would be wise in this market for instance because of unemployment and depression in individuals, and thus increased sales.
Does anyone use this sort of a model for investing? I have very little exposure to the markets, but Im aware that behavioral finance is mostly quant, and that a lot of it has to do with selling off of companies that are undervalued based on fear. Thoughts are greatly appreciated.
“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
- Schopenhauer
First off, behavioural trading and investing are completely different animals.
You seem to talking about value investing, there are plenty of books on the topic, the most prevalent being 'The Intelligent Investor' by Benjamin Graham.
Behavioural trading is based on indicators such as RSI, Trin, Confidence Index, Put/call ratio or Short interest.
"The power of accurate observation is commonly called cynicism by those who have not got it." - George Bernard Shaw
First off, behavioural trading and investing are completely different animals.
You seem to talking about value investing, there are plenty of books on the topic, the most prevalent being 'The Intelligent Investor' by Benjamin Graham.
Behavioural trading is based on indicators such as RSI, Trin, Confidence Index, Put/call ratio or Short interest.
I would argue that 'behavioral trading' is based on a trend-following approach rather than using a bunch of indicators randomly.
First off, behavioural trading and investing are completely different animals.
You seem to talking about value investing, there are plenty of books on the topic, the most prevalent being 'The Intelligent Investor' by Benjamin Graham.
Behavioural trading is based on indicators such as RSI, Trin, Confidence Index, Put/call ratio or Short interest.
I would argue that 'behavioral trading' is based on a trend-following approach rather than using a bunch of indicators randomly.
Use the indicators to gauge market sentiment, extrapolate the trend, trade. Pretty simple.
"The power of accurate observation is commonly called cynicism by those who have not got it." - George Bernard Shaw
JM: Interesting. Thanks for the clarification. Do you know how different funds apply these concepts? Or what preferences exist for the period of time in which the stocks are understood to be held to reach maximum value?
I know that Buffett is understood to be a value investor, but he also seems to be interested in holding stocks for at least a 10 year period. I dont know how applicable that is to short term fluctuations, or how profitable a strategy based off of short term fluxes would be (like an expected increase in sales that could be sustained for a couple of years, but not more).
Thanks
“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
- Schopenhauer
JM: Indicators only account for past events. How would you apply them to something which youre predicting, but which isn't accounted for by the general market (i.e. the downgrade)?
“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
- Schopenhauer
JM: Indicators only account for past events. How would you apply them to something which youre predicting, but which isn't accounted for by the general market (i.e. the downgrade)?
That's exactly you use price action to gauge market sentiment, not a RSI overbought/ oversold or divergence signal. Prices were tanking and that's all you need to know.
how many of you people have read a research paper on behavioral finance- or even a wikipedia entry? First, you're reasoning is just the basic philosophy of general business in a nutshell- anticipating future needs and capitalizing on it. That's what every single business entails- whether its trading securities or setting up a seaside restaurant.
Second, behavioral finance is an academic field that is a subset of behavioral economics. It has nothing to do with trend following or any specific trading strategy. Behavioral economics is basically an attempt to explain why classical economics (rational self-interest) doesn't seem to hold true in the real world (e.g. poor people voting republican). Behavioral finance is a subset of that that deals more with explaining why another subset of classical economics (efficient markets) doesn't seem to hold true in the financial world (e.g. contagion/panic in financial markets that cause valuations to be drastically different the underlying value for long periods of time). The reason its called "behavioral" is because it discusses the behavior (psychology) of the economic agents (people, investors) to explain the economic anomaly. ( Note the difference between "explaining" and "predicting"!
As for "behavioral trading", I have no idea what that means. A previous poster seems to say that it is a euphemism for technical analysis- very well then.
Seigniorage: The issue Im having is that it doesn't seem to me that most trading is based off of analysis of the actual value of the companies, or expected future value. One strategy for trading, for example, that was being described by James Altucher was buying any stock that had fallen in price for four days, and then selling after two days. ( http://blogs.wsj.com/financial-adviser/2010/02/11/a-simple-way-to-beat-… ). Back tested '92, this has produced pretty sizable returns. This, of course, doesn't tell us next to anything about the price of the stocks except that people more often than not sold stocks for less than they were worth just a couple days afterwards (and with only a couple of days in between, they were probably sold without any news coming out). So it seems to me that if this strategy for instance is so successful, then many stocks would not be traded on a value basis. They would be traded on some other basis. I'm new to this though, would those other basis' be accounting for potential future losses? That seems very odd to me.
“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
- Schopenhauer
Behavioral Finance - Any good source? (Originally Posted: 11/05/2011)
I have a presentation in college in about a month about "Underreaction and investment practice".Any good source in order to find some things to write in powerpoint?Dont tell me google,i know:P.
Behavioral Finance Symposium in SF (Originally Posted: 11/04/2013)
Does anyone plan on attending this event on Saturday(Nov. 9th)? I've been invited by one of the speakers, and hear that it will be quite interesting and well worth the time. Also, if you're serious about attending, pm me and perhaps I can help with a code.
Behavioral Finance - Any funds that use the concept? (Originally Posted: 06/14/2010)
Are there any funds that use the concepts of behavioral finance as a strategy? If yes, would they be more likely to recruit people with a psychology background? I know JP Morgan had a few funds that focused on behavioral finance but I think that was in the 90s (there's an HBS case about them)
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“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
- Schopenhauer
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Become a professor ?
I am not that hardworking and willing to work with low payment.Maybe if i earn enough to sponsor myself,i can go back to school and do my phd but not right now.
Behavioral Finance - Any funds that use the concept? (Originally Posted: 06/14/2010)
Are there any funds that use the concepts of behavioral finance as a strategy? If yes, would they be more likely to recruit people with a psychology background? I know JP Morgan had a few funds that focused on behavioral finance but I think that was in the 90s (there's an HBS case about them)
Most of the behavioral finance managers are more quantitative/systematic. Academic literature in behavioral finance is extremely data driven. Places like Fuller & Thaler, and LSV are essentially implementing what you find in behavioral finance papers - which involves a lot of programming and data mining.
The JPMorgan Asset Mgmt HBS case basically outlined a couple of quantitative funds and a marketing gimmick for private wealth clients.
check out http://www.alliancebernstein.com/investments/ABII/DisplayFile.aspx?cid=…
Macro level behavioral finance (Originally Posted: 08/12/2011)
Anyone here trade on a behavioral basis? Where do you get the strategies from if you do?
I was reading Watchmen the other day, and one of the things that was described in it (minimally) was Ozymandius in one of the later chapters when he was arriving at his place. Guy puts on a bunch of televisions in order to understand the mood of people. He then comes to the conclusion that certain ideas were becoming/going to become prevalent in general, from the tone of what he observed, and he then chose certain areas of the market which he thought would be getting growth because of those ideas.
Specifically, he sees that there is a trend towards more sexualization, aggressiveness and sentimentality in the media, which he attributed to a desire to remove the self from responsibility. He then suggests that this is due to the idea that a war is commonly predicted as happening, and that there will be an increase in reproduction as happened in other war times like the baby boom. He then decided to buy in to companies that produced devices for babies, baby food, and adult entertainment.
I think that a strategy can be made to approach to markets using this reasoning. Investing in BUD or ADR for instance would be wise in this market for instance because of unemployment and depression in individuals, and thus increased sales.
Does anyone use this sort of a model for investing? I have very little exposure to the markets, but Im aware that behavioral finance is mostly quant, and that a lot of it has to do with selling off of companies that are undervalued based on fear. Thoughts are greatly appreciated.
Also interested
First off, behavioural trading and investing are completely different animals.
You seem to talking about value investing, there are plenty of books on the topic, the most prevalent being 'The Intelligent Investor' by Benjamin Graham.
Behavioural trading is based on indicators such as RSI, Trin, Confidence Index, Put/call ratio or Short interest.
I would argue that 'behavioral trading' is based on a trend-following approach rather than using a bunch of indicators randomly.
Use the indicators to gauge market sentiment, extrapolate the trend, trade. Pretty simple.
JM: Interesting. Thanks for the clarification. Do you know how different funds apply these concepts? Or what preferences exist for the period of time in which the stocks are understood to be held to reach maximum value?
I know that Buffett is understood to be a value investor, but he also seems to be interested in holding stocks for at least a 10 year period. I dont know how applicable that is to short term fluctuations, or how profitable a strategy based off of short term fluxes would be (like an expected increase in sales that could be sustained for a couple of years, but not more).
Thanks
JM: Indicators only account for past events. How would you apply them to something which youre predicting, but which isn't accounted for by the general market (i.e. the downgrade)?
That's exactly you use price action to gauge market sentiment, not a RSI overbought/ oversold or divergence signal. Prices were tanking and that's all you need to know.
how many of you people have read a research paper on behavioral finance- or even a wikipedia entry? First, you're reasoning is just the basic philosophy of general business in a nutshell- anticipating future needs and capitalizing on it. That's what every single business entails- whether its trading securities or setting up a seaside restaurant.
Second, behavioral finance is an academic field that is a subset of behavioral economics. It has nothing to do with trend following or any specific trading strategy. Behavioral economics is basically an attempt to explain why classical economics (rational self-interest) doesn't seem to hold true in the real world (e.g. poor people voting republican). Behavioral finance is a subset of that that deals more with explaining why another subset of classical economics (efficient markets) doesn't seem to hold true in the financial world (e.g. contagion/panic in financial markets that cause valuations to be drastically different the underlying value for long periods of time). The reason its called "behavioral" is because it discusses the behavior (psychology) of the economic agents (people, investors) to explain the economic anomaly. ( Note the difference between "explaining" and "predicting"!
As for "behavioral trading", I have no idea what that means. A previous poster seems to say that it is a euphemism for technical analysis- very well then.
Seigniorage: The issue Im having is that it doesn't seem to me that most trading is based off of analysis of the actual value of the companies, or expected future value. One strategy for trading, for example, that was being described by James Altucher was buying any stock that had fallen in price for four days, and then selling after two days. ( http://blogs.wsj.com/financial-adviser/2010/02/11/a-simple-way-to-beat-… ). Back tested '92, this has produced pretty sizable returns. This, of course, doesn't tell us next to anything about the price of the stocks except that people more often than not sold stocks for less than they were worth just a couple days afterwards (and with only a couple of days in between, they were probably sold without any news coming out). So it seems to me that if this strategy for instance is so successful, then many stocks would not be traded on a value basis. They would be traded on some other basis. I'm new to this though, would those other basis' be accounting for potential future losses? That seems very odd to me.
Behavioral Finance - Any good source? (Originally Posted: 11/05/2011)
I have a presentation in college in about a month about "Underreaction and investment practice".Any good source in order to find some things to write in powerpoint?Dont tell me google,i know:P.
http://tinyurl.com/6cs2hl9
this is a good place to start
And I thought people naturally tend to overreact..
Behavioral Finance Symposium in SF (Originally Posted: 11/04/2013)
Does anyone plan on attending this event on Saturday(Nov. 9th)? I've been invited by one of the speakers, and hear that it will be quite interesting and well worth the time. Also, if you're serious about attending, pm me and perhaps I can help with a code.
Link: http://www.behavioralfinance.org/Default.aspx?pageId=1649844
Hey. thanks for posting. Looks like a good event.
Attending?
Sorry, not in town, otherwise I would have followed up.
Behavioral Finance - Any funds that use the concept? (Originally Posted: 06/14/2010)
Are there any funds that use the concepts of behavioral finance as a strategy? If yes, would they be more likely to recruit people with a psychology background? I know JP Morgan had a few funds that focused on behavioral finance but I think that was in the 90s (there's an HBS case about them)
Voluptate itaque deserunt sint tempora numquam recusandae assumenda dolorem. Expedita eligendi repellendus aut harum doloremque. Distinctio reiciendis error cumque magnam eius sunt quis nulla. Aut necessitatibus provident non architecto alias corrupti.
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Corrupti iure est alias velit eum odit aspernatur. Et voluptates quia officia. Quia est minima dolor aut explicabo facilis.
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