Behavioral Portfolio Management: How successful investors master their emotions and build superior portfolios
- ISBN-10
- 0857193252
- ISBN-13
- 9780857193254
- Category
- Business & Economics
- Pages
- 329
- Language
- English
- Published
- 2014-03-17
- Publisher
- Harriman House Limited
- Author
- C. Thomas Howard
Description
The investment industry is on the cusp of a major shift, from Modern Portfolio Theory (MPT) to Behavioral Finance, with Behavioral Portfolio Management (BMP) the next step in this transition. BPM focuses on how to harness the price distortions that are driven by emotional crowds and use this to create superior portfolios. Once markets and investing are viewed through the lens of behavior, and portfolios are constructed on this basis, investable opportunities become readily apparent. Mastering your emotions is critical to the process and the insights provided by Tom Howard put investors on the path to achieving this. Forty years of Behavioral Science research presents a clear picture of how individuals make decisions; there are few signs of rationality. Indeed, emotional investors sabotage their own efforts in building long-horizon wealth. When this is combined with the misconception that active management is unable to generate superior returns, the typical emotional investor leaves hundreds of thousands, if not millions, of dollars on the table during their investment lifetimes. Howard moves on to show how industry practice, with its use of the style grid, standard deviation, correlation, maximum drawdown and the Sharpe ratio, has entrenched emotion within investing. The result is that investors construct underperforming, bubble-wrapped portfolios. So if an investor masters their own emotions, they still must challenge the emotionally-based conventional wisdom pervasive throughout the industry. Tom Howard explains how to do this. Attention is then given to measureable and persistent behavioral factors. These provide investors with a new source of information that has the potential to transform how they think about portfolio management and dramatically improve performance. Behavioral factors can be used to select the best stocks, the best active managers, and the best markets in which to invest. Once the transition to behavioral finance is made, the emotional measures of MPT will quickly be forgotten and replaced with rational concepts that allow investors to successfully build long-horizon wealth. If you take portfolio construction seriously, it is essential that you make the next step forward towards Behavioral Portfolio Management.
Get the book
Similar books
-
Behavioral Investment Management: An Efficient Alternative to Modern Portfolio Theory
By Arnaud de Servigny, Greg B. DaviesThe End of Modern Portfolio Theory Behavioral Investment Management proves what many have been thinking since the global economic downturn: Modern Portfolio Theory (MPT) is no longer a viable portfolio management strategy.
-
Behavioral Finance and Your Portfolio: A Navigation Guide for Building Wealth
By Michael M. PompianDesigned for investors who are serious about maximizing their gains, in this book you’ll discover how to: ● Take control of your decision-making—even when challenging markets push greed and fear to intolerable levels ● Reflect on ...
-
Managing Equity Portfolios: A Behavioral Approach to Improving Skills and Investment Processes
By Michael A. ErvoliniThis book, by an experienced advisor to institutional money managers, goes beyond conventional thinking to offer a new analytic framework that enables investors to improve their performance confidently, deliberately, and simply, by applying ...
-
BEHAVIORAL INVESTOR.
By DANIEL. CROSBYIn the behavior investor, psychologist and asset manager Daniel crosby examines the sociological, neurological and psychological factors that influence our investment decisions and sets forth practical solutions for improving both returns ...
-
Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases
By Michael M. PompianRead and do not stop until you are one of very few magicians." —Arnold S. Wood, President and Chief Executive Officer Martingale Asset Management "I wish this book had been available a decade ago; by understanding behavioral biases, ...
-
Personal Benchmark: Integrating Behavioral Finance and Investment Management
By Charles Widger, Daniel CrosbyThis book gives advisors the tools needed to effectively communicate the design and execution of the Personal Benchmark solution.
-
Behavioral Finance and Wealth Management: How to Build Investment Strategies That Account for Investor Biases
By Michael M. PompianThis book: Shows investors and financial advisors how to either moderate or adapt to behavioral biases, in order to improve investment results and identifies "the best practical allocation" for investment portfolios.
-
Behavioral Finance and Investor Types: Managing Behavior to Make Better Investment Decisions
By Michael M. PompianThis book provides an outstanding road map for understanding our individual behavioral biases, embracing our unique investor personality, and allocating our portfolios to capitalize on our individual strengths.
-
The Little Book of Behavioral Investing: How not to be your own worst enemy
By James MontierIn The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors.
-
Modern Portfolio Management: Moving Beyond Modern Portfolio Theory
By Todd E. PetzelNaturally, spending rule calculations are based on these marks. In bull markets, this has produced rising endowment values and accelerating spending, even if the assets are not readily available to fund that spending.