Tuesday, August 25, 2009

Behavioral Finance Article In The Wall Street Journal Online

This article's already been picked up by Simoleon Sense, but I'm linking to it here because I want to highlight it as an easy-to-read introduction to cognitive and emotional biases that pop in when we invest or trade. It's called "The Mistakes We Make—and Why We Make Them," and it's by Meir Statman.

He spends more time on emotional biases than the usual intro. Regret is discussed thoroughly, but anchoring isn't mentioned. Prof. Statman has the gift of matching biases to investing activity we can all relate to; it's as if he had been there himself. He even ends with why a well-known investing technique gets around our regret bias. It makes for a good read.

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