The Psychology of Investor Behavior (part1/2)
Scott Bosworth, CFA, Vice President of Dimensional Fund Advisors presents Part One of The Psychology of Investor Behavior Video Series (Behavioral Finance). Some topics:
-) Are we working against ourselves when we invest?
-) Do our instincts betray our own decision making process?
-) Threats (Fear) and Opportunities (Greed / "the next door neighbour effect")
-) Market bubbles (Tulip Mania, South Sea Bubble)
-) explanation on Attribution Bias, Confirmation Errors, Anchoring & Extrapolation, Familiarity Bias like the Home Bias
-) Irrational Escalation, Framing Errors
"I can calculate the motion of heavenly bodies, but not the madness of people", Sir Isaac Newton
"Financial losses are processed in the same areas of the brain that respond to mortal danger"
Scott digs also into our cognitive biases like overconfidence, illusion of control, loss aversion and regret avoidance.
Also a short explanation is given how Behavioral Finance was involved in Sir Isaac Newtons' investment decisions.