Behavioral Finance

Behavioral Finance is the study of how people make financial decisions in the real world. It stands in contrast to traditional classical economics and finance, which both assume that people are always rational and make decisions according to a logical cost-benefit analysis of their options.

Recent advancements in behavioral finance shed an important light on one of the most important questions in personal finance: why do we continue to make poor decisions with our money, even when we basically know what we should be doing?

This tutorial will go over some of the behavioral finance research on how the brain deals with money decisions. It will also discuss their implications, including how you can insulate yourself from making money mistakes, and even how you can profit from the predictable mistakes of others.

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Why Smart People Do Dumb Things with Their Money

Like most people I think, everything that I can ever remember doing has seemed perfectly rational to me... at the second I was doing it. Reflecting years later... not so much. I won't go into details here, but you can use your imagination or look...

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Why the Stock Market Sometimes Has The Maturity Level of a 5 Year Old: An Intro To Market Anomalies

As human beings, we are attached to stories, perhaps irrationally so. In what Nassim Taleb calls the "narrative bias," we are really good at crafting a logically tight story to explain nearly anything -- but only after it has already happened!...

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Money

Behavioral Investing: How to Use the Principles of Behavioral Finance To Make Money

Reading fun psychological experiments and understanding the market from a theoretical perspective is all well and good, but at some point the goal of investing is quite simple: to make money. This article will look at different ways that you can employ the principles of behavioral investing to achieve that ever-so-righteous goal.

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What Goes Up, Continues to Go Up? A Beginner's Guide to Profitable Momentum Investing

A glut of evidence has indicated that stock market prices are not random, but instead exhibit momentum, with past "winners" continuing to outperform past "losers" into the future. 

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Will Momentum Continue to Work in the Future?

To survive in the stock market, you should generally be highly skeptical about the existence of seemingly surefire ways to “beat” the stock market. So should you be wary of investing in "momentum" strategies?

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