Finance for Normal People

Finance for Normal People : How Investors and Markets Behave

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Finance for Normal People teaches behavioral finance to people like you and me - normal people, neither rational nor irrational. We are consumers, savers, investors, and managers - corporate managers, money managers, financial advisers, and all other financial professionals.

The book guides us to know our wants - including hope for riches, protection from poverty, caring for family, sincere social responsibility and high social status. It teaches financial facts and human behavior, including making cognitive and emotional shortcuts and avoiding cognitive and emotional errors such as overconfidence, hindsight, exaggerated fear, and unrealistic hope. And it guides us to banish ignorance, gain knowledge, and increase the ratio of smart to foolish behavior on our way
to what we want.

These lessons of behavioral finance draw on what we know about us - normal people - including our wants, cognition, and emotions. And they draw on the roles of these factors in saving and spending, portfolio construction, returns we can expect from our investments, and whether we can hope to beat the market.

Meir Statman, a founder of behavioral finance, draws on his extensive research and the research of many others to build a unified structure of behavioral finance. Its foundation blocks include normal behavior, behavioral portfolio theory, behavioral life-cycle theory, behavioral asset pricing theory, and behavioral market efficiency.
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Product details

  • Hardback | 488 pages
  • 161 x 242 x 30mm | 826g
  • New York, United States
  • English
  • 019062647X
  • 9780190626471
  • 692,261

Table of contents

Introduction: What is Behavioral Finance?

Part 1: Behavioral People are Normal People
Chapter 1: Normal People
Chapter 2: Our Wants for Utilitarian, Expressive, and Emotional Benefits
Chapter 3: Cognitive Shortcuts and Errors
Chapter 4: Emotional Shortcuts and Errors
Chapter 5: Correcting Cognitive and Emotional Errors
Chapter 6: Experienced Happiness, Life-Evaluation, and Choices: Expected Utility Theory and Prospect Theory
Chapter 7: Behavioral Finance Puzzles: The Dividend Puzzle, the Disposition Puzzle, and the Puzzles of Dollar-Cost-Averaging and Time-Diversification

Part 2: Behavioral Finance in Portfolios, Life-Cycles, Asset Prices, and Market Efficiency
Chapter 8: Behavioral Portfolios
Chapter 9: Behavioral Life-Cycles of Saving and Spending
Chapter 10: Behavioral Asset Pricing
Chapter 11: Behavioral Market Efficiency
Chapter 12: Lessons of Behavioral Finance
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Review quote

Yes, to be successful, we need to make good investments, but then we need to be good investors, exhibiting the virtues of simplicity, broad diversification, and low investment costs, and focusing on the long term. This fine book is welcome help. * John C. Bogle, founder of Vanguard and the first index mutual fund * One of the pioneers of behavioral finance, Meir Statman has done a great service for investors, portfolio managers, and financial regulators with this insightful volume. If you've ever wondered why you sold too early or why you got in too late, you need to read this book! * Andrew Lo, Charles E. and Susan T. Harris Professor of Finance, MIT Sloan School of Management * Meir Statman, a leading light of behavioral finance, describes lucidly and vividly the cognitive and emotional errors underlying the maxim "If you don't know who you are, the stock market is an expensive place to find out." Readers of this behaviorally savvy book will be well prepared to avoid those errors. * Paul Slovic, Professor of Psychology, University of Oregon, and author of The Perception of Risk * Meir Statman describes investors as normal in this insightful book, not irrational as in earlier behavioral finance, and not rational wealth-maximizing caricatures as in typical textbooks. Normal investors underlie Statman's innovative approach to portfolios, saving and spending, asset pricing, and market efficiency. * Harry Markowitz, Winner, Nobel Prize in Economics, and Professor of Finance at the Rady School of Management * As Pogo used to say: 'We have met the enemy and we are it.' By elucidating clearly the teachings of behavioral finance, Meir Statman shows us how to avoid the common errors investors make and how to become smarter investors. * Burton G. Malkiel, author of A Random Walk Down Wall Street, 11th ed. Paper, 2016 *
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About Meir Statman

Meir Statman is the Glenn Klimek Professor of Finance at the Leavey School of Business, Santa Clara University. His research on behavioral finance has been supported by the National Science Foundation, CFA Institute, and Investment Management Consultants Association (IMCA) and has been published in the Journal of Finance, Financial Analysts Journal, Journal of Portfolio Management, and many other publications. A recipient of three Baker IMCA Journal
Awards, the Moskowitz Prize for Best Paper on Socially Responsible Investing, and three Graham and Dodd Awards. Statman consults with many investment companies and presents his work to academics and professionals in the U.S. and abroad.
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Rating details

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