Behavioural economics moved into the mainstream when psychologist Daniel Kahneman was awarded the Nobel Prize for economics. Ironically, his work was critical of classical economics. He focused on how human behaviour differs from what economists would expect, from their theoretical viewpoint. (vii) Show More
The study of behavioural economics allows us to better understand the decisions we make. We show how behavioural finance can lead to better investment decision making. We explore the inherent biases we must overcome to achieve our long-term investment goals. And we provide six tips to improve investment decision making. Show More
Are you the hunter? Or the hunted? Never thought about it like that when it comes to investing? Well then you are the hunted. The hunter is patient. Very patient. Always aware. Watching, calculating. Then pouncing. Fast and lethal. When I sit down with my trading coach, it is a... Show More
In a world of uncertainty in which our brains are often subconsciously working against us, it’s a good practice to regularly challenge our investment views. “Am I being overconfident in my beliefs about the future?” “Am I being overly optimistic about the prospects of certain assets based on recent experience?”... Show More
Managed futures, which are often referred to as CTAs are quantitative, evidence-based hedge fund strategies that seek to generate returns by investing in trends across a broad range of asset classes including rates, currencies, equities, bonds and commodities using futures. They are also often referred to as trend following strategies,... Show More
In this entertaining short article, Wheelhouse reviews the evidence pointing to the significant positive impact that financial advisors can have on their clients. Show More
For decades, the prevailing view of financial markets was one of rational actors creating efficient prices. In recent years, particularly in the wake of the GFC, investors have increasingly adopted a very different view of how markets operate. Loss aversion bias, anchoring, and herding (among others) have all become popular... Show More
To paraphrase from an excellent book, The Chimp Paradox; ‘to control your inner chimp, you first have to understand him/her’. This means understanding that your brain makes decisions that are not always in your best interest and the best way to do this set rules around certain behaviours to minimize... Show More
One of the most important lessons from behavioural finance is that the market can stay irrational longer than you can stay solvent. Everyday investors can apply a basic test when they make an investment by asking themselves ‘does the price I’m paying for this asset seem reasonable?’ If you are... Show More
The concept of ‘herding’ is a powerful lesson that investors should not ignore. Herding is the bias that can lead investors to follow the crowd, whether they genuinely agree with what they are doing, or are just scared of being left standing alone. Show More
In my 30 years as an analyst and fund manager, I have seen recurring business situations and patterns of behaviour that often lead to mispricing by the market. This attracted me to the idea of behavioural economics, as a validation of some of these insights. Show More
At a fund presentation yesterday, the manager said: “At its core, investing is actually a very simple business… The problem, however, is that it’s incredibly difficult”. Part of the reason is the plethora of cognitive biases we have as humans, five of which are summarised in this infographic from Visual... Show More