Behavioural Finance [Hardback]
Insights into Irrational Minds and Marketsby James Montier
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Description of Behavioural Finance"In his splendid handbook for institutional investors, James Montier combines the insights he has gained as a practitioner, with the insights he has gleaned reading the academic literature in behavioural finance. Most importantly, Montier identifies key lessons to help institutional investors mitigate their susceptibility to psychologically-induced errors and biases."
- Professor Hersh M. Shefrin, Leavey School of Business & Administration, Santa Clara, University
"Behavioural Finance is unique in combining in a practical way the insights of a very experienced investment practitioner with a very readable review of what the research evidence tells us. This book is essential reading for all serious students of market behaviour and any investor wanting to know how behavioural finance can be used to enhance investment returns."
- Professor Richard Taffler, Head of Finance and Accounting, Cranfield School of Management, UK
"Behavioural finance abandons the assumptions of investor rationality and suggests that people do make mistakes in a consistent and predictable manner. Investors need to understand the herd if they want to make sense and profit from today's markets. James Montier's accessible book soundly guides the reader from behavioural finance theory to application. Don't grapple with the academic literature - just read Montier."
- Christian E Elsmark, Investment Director, JPMorgan Fleming Asset Management
Press and Industry Reviews"...The finding is surprising, as the City is notoriously full of arrogant young men betting on financial markets Mr Montier has unearthed bizarre facts which suggest stock markets are frequently driven by entirely irrational factors..."
- The Daily Telegraph, 25 November 2002
"...In a new book, James Montier outlines practical methods for exploiting the anomalies thrown up by behavioural finance..."
- Financial Times, 25 November 2002
"a good introduction to this subject."
- Professional Investor, March 2003
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About James MontierJames Montier (London, UK) is the Director of Global Strategy at Dresdner Kleinwort Watterstein. Prior to this, he was director of investment strategy for Old Mutual Securities.
Contents of Behavioural FinanceIntroduction
1. Psychological Foundations
Biases of Judgement or Perception is Reality
Errors of Preference or There is No Such Thing as Context-free Decision Making
2. Imperfect Markets and Limited Arbitrage
Efficiency and LOOP
Positive Feedback Trading
Risk Management and Limited Arbitrage
On the Survival of Noise Traders
3. Style Investing
Potential Gains to Style Rotation
Life Cycle of an Investment Style
Value vs. Growth: Risk or Behavioural?
Timing the Switch
4. Stock Valuation
Keynes' Beauty Competition
The (Ir)relevance of Fundamentals
Valuation and Behavioural Biases
Cost of Capital
Factors from Limited Arbitrage
An Analyst's Guide
5. Portfolio Construction and Risk Management
Distribution of Returns
Fat Tails or Outliers?
6. Asset Allocation
Markets and Fundamentals
Dividend Yield, Spreads and Ratios
Earnings Yield, Spreads and Ratios
The Equity Risk Premium
Should Corporate Financiers be Running TAA?
Crashes as Critical Points
7. Corporate Finance
Irrational Managers/Rational Markets
Rational Managers/Irrational Markets
8. The Indicators
Asset Allocation Measures