Behavioral Finance as students, we would argue that "behavioral finance" is nowhere in fact a lot of psychology, sociology, economy and finance a bit of a pinch. But, as you call it, decisions every day on the social, cognitive, emotional and genetic studies of affect as we do. This study not only applies to business decisions, but also for health and lifestyle decisions. In short, The idea is simple: Most people, except some thin behaviors that seem irrational to participate in a series (we are in this category can not stop thinking about Warren Buffett). the irrational behavior Stories can be about fun, but focus on the positive aspects of the discipline. But as a result of our study, the better we understand our clients and our donors. Why study classic bad investment, sometimes in a position on the "save themselves" for customers to ask because we are wired to do sometimes.
The main role of a consultant to manage the behavior of a customer often has your wallet. Nick Murray, in his latest newsletter he writes: "The essence of personalized investment advice, the tendency for many of us panic, long-term investment success in real life from the tyranny of the passions of their own oppression,leads to the market that neither he, nor anyone else to do consistently, but can do the same thing on the shelf. "
In order to understand behavioral finance, it is important to understand, first, the efficient market hypothesis (EMH). According to EMH, the main financial markets in a given time reflect all relevant information. Underlying assumptions of EMH is that investors are rational, but rationality is independent of the deviation. EMH, these deviations or to cancel each other out, or as a group of rational investors take advantage of the situation. Either way the market is to stay in balance. Therefore, as the old joke was on the sidewalk, never an actual bill of $ 100. Without doubt economist EMH, according to the project was in fact someone else had already gathered.
Whether markets are efficient, comprehensive, and we have no intention of finishing, at least more entertaining than the article discussing the debate.the possibility that life comes to something, what you should eat, how much exercise a stock, a charitable organization to evaluate and how to sell a life companion.
When Terry Burnham said: ..economically in a market "and philanthropy in today's financial markets to some extent we can fish out of water. We are aware of these biases and prejudices, we can correct ourselves and our customers expect. Call your investment advisor in a recent article in the rise of irrationality, commentators said Olivia our "irrational" behavior Mellan "... random or meaningless: they are systematic and predictable."