Behavioral Bias Bingo: Decoy Effect
“When my information changes, I alter my conclusions. What do you do, sir?” – John Maynard Keynes How does the Decoy Effect work? Here is a simple example from Huber, Payne and Puto (1982): A store...
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Behavioral Bias Bingo: Confirmation Bias
Confirmation bias leads to the selective use of information It is easy to obtain confirmations, or verifications, for nearly every theory – if we look for confirmations. – Karl Popper We’ll start with...
View ArticleBehavioral Bias Bingo — The Illusion of Control
The Illusion of Control In most elevators, at least in any built or installed since the early nineties, the door-close button doesn’t work. It is there mainly to make you think it works. (It does work...
View ArticleBehavioral Bias Bingo — Mental Accounting
Mental Accounting and Your Money “Mr. and Mrs. L and Mr. and Mrs. H went on a fishing trip in the northwest and caught some salmon. They packed the fish and sent it home on an airline, but the fish...
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Behavioral Bias Bingo — The Whimsical Cuteness Effect
“So Cute I Could Eat it Up”: Priming Effects of Cute Products on Indulgent Consumption Nenkov and Scott A version of the paper can be found here. Want a summary of academic papers with alpha? Check out...
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Behavioral Bias Bingo — Availability Heuristic
If you can recall something, you think it’s important From 1990 through 2000 there were 1.4 deaths per 10 million passengers on U.S. scheduled airlines. Flying understandably feels dangerous. But we...
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Behavioral Bias Bingo — False-Consensus Bias
I Believe…Why Don’t You? To believe your own thought, to believe that what is true for you in your private heart, is true for all men–this is genius. — Emerson, Self-reliance (1841) False consensus —...
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Behavioral Finance: Part Behavior, Part Market Frictions
The baseline theory for understanding asset prices is the Efficient Market Hypothesis (the “EMH”), pioneered by Eugene Fama. Of particular interest is semi-strong market efficiency, which claims that...
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What is Behavioral Finance?
Behavioral finance means a lot of things to a lot of people. In this short piece I’ll outline what “behavioral finance” means to academic researchers. The image below highlights the foundations of...
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Behavioral Finance and Investing
Are you trying too hard? The case for systematic decision-making1 2 Author: Wesley R. Gray, PhD. PDF Version Download Executive Summary: Everyone makes mistakes. It’s part of what makes us human....
View ArticleTop 10 Rules for Forecasting
h.t. M Kline Note: This site provides no information on our value investing ETFs or our momentum investing ETFs. Please […] The post Top 10 Rules for Forecasting appeared first on Alpha Architect.
View ArticleTop 10 Rules for Forecasting
h.t. M Kline The post Top 10 Rules for Forecasting appeared first on Alpha Architect.
View ArticleDo Rituals Make you a Better Investor?
Rituals Enhance Consumption Vohs, J., Y. Wang, F. Gino, and M. I. Norton. A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap...
View ArticleThe Trouble with Non-Transparent Active ETFs
Barron's has an interesting article discussing "The Trouble with Actively Managed ETFs." The article should have been titled "The Trouble with Non-Transparent Active ETFs." A few quotes from the...
View ArticleBehavioral Finance 101 for Wall Street: Social Anchoring
The “anchoring bias” is firmly established in psychology circles, but a more recent area of focus within the field--social anchoring--is opening up some intriguing new possibilities for how anchoring...
View ArticleEverything You Wanted to Know About Investing (but were afraid to ask)
I'm new to the crew here, but I'd like to introduce myself. My name is Gabe Kates and I'm currently a student at Haverford College, which is a small liberal arts school located in the Philadelphia...
View ArticleMarket Crash Stressing You Out? It Should…
Cortisol Shifts Financial Risk Preferences Kandasamy et al. A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category!...
View ArticleThe Golfer’s Dilemma: A Case for Systematic Decision-Making
Many of you may know that golfers often fall victim to mental "distractions" that severely inhibit the quality of their game. However, those "distractions" also translate to the marketplace--where...
View ArticleMedia Coverage and Stock Returns
Been thinking about availability bias and how it affects stock returns. This isn't a new paper, but it is interesting nonetheless--An "oldie but goodie."...
View ArticleWe are in May–Should we Sell and Go Away?
Tian, the newest team member, did a nice study on the "Sell in May and Go Away" phenomenon. It has been an old axiom in stock market for generations: Sell in May and Go Away. Many readers may have...
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