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Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases Hardcover – January 3, 2012


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Product Details

  • Hardcover: 352 pages
  • Publisher: Wiley; 2 edition (January 3, 2012)
  • Language: English
  • ISBN-10: 1118014324
  • ISBN-13: 978-1118014325
  • Product Dimensions: 1.2 x 6.4 x 9.3 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (2 customer reviews)
  • Amazon Best Sellers Rank: #323,226 in Books (See Top 100 in Books)

Editorial Reviews

From the Inside Flap

Behavioral Finance and Wealth Management

How to Build Investment Strategies That Account for Investor Biases

Since the first edition of Behavioral Finance and Wealth Management was published—in the wake of the bursting of the technology bubble in 2000—the world faced yet another economic crisis in 2008. Accompanying this crisis is a new level of market volatility, and both investors and advisors can benefit from a deeper understanding of behavioral finance and how it can help them achieve their long-term financial goals. That's why author Michael Pompian, a wealth manager and practitioner at the forefront of the practical application of behavioral finance, has written the second edition of this book.

As an investment advisor, Pompian understands the behavioral biases that investors have. He has discovered specific ways to adjust investment strategies for these biases and in the Second Edition of Behavioral Finance and Wealth Management, Pompian helps investors and their advisors develop a heightened awareness of these biases so that financial decisions, and resulting economic outcomes, can be improved.

Divided into six comprehensive parts, this reliable guide opens with an introduction to the basics of behavioral finance, focusing on the aspects most relevant to individual wealth management. From here, Parts Two (Belief Perseverance Biases), Three (Information Processing Biases), and Four (Emotional Biases) define and illustrate a total of twenty of the most important biases—within the cognitive-emotional framework—for considering potential biases. For each of the twenty biases, Pompian uses the same basic format in discussing the bias, in order to promote greater accessibility.

After covering the foundations of behavioral finance, the biases, Part Five turns to the main focus of this book: practical application of behavioral finance for investors and advisors. This section establishes a basic framework for integrating behavioral finance insights into portfolio structure and presents the concept of best practical allocation. It then takes the concepts presented and applies them in a case study format to reinforce learning.

Rounding out this detailed discussion, Part Six ties together many of the concepts covered in the book and introduces a new concept Pompian has developed to make behavioral finance easier to apply in practice. The idea of Behavioral Investor Types (BITs) is introduced along with the investment biases that are associated with each one.

Updated to reflect current market conditions, this reliable resource skillfully illustrates investors' behavioral biases in detail and offers financial advisors and their clients practical advice about how to apply the science of behavioral finance to improve overall investment decision making.

From the Back Cover

Praise for the first edition of Behavioral Finance and Wealth Management

"Pompian is handing you the magic book, the one that reveals your behavioral flaws and shows you how to avoid them. The tricks to success are here. Read and do not stop until you are one of very few magicians." —Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management

"I wish this book had been available a decade ago; by understanding behavioral biases, clients and professionals can stay focused and comfortable throughout the markets' bubbles and doldrums. Michael Pompian moves our profession forward by proposing a standardized structure for this approach." —Elizabeth K. Miller, CFA, Managing Director, Trevor Stewart Burton & Jacobsen Inc., and former chair, New York Society of Security Analysts' Wealth Management Committee

"Many inefficiencies in the market are the result of how investors let their emotions dictate their investment decisions. Michael Pompian's work provides a framework to understand why these inefficiencies exist, and how they can provide investors with significant profit-making opportunities." —Stanley G. Lee, CFA, Principal, David J. Greene & Company, LLC

"Michael Pompian has created a valuable resource for investors and those in the wealth management community by not only explaining a number of important behavioral biases, but also giving them actionable steps to reduce biases and improve investment performance." —John M. Longo, PhD, CFA, Senior Vice President, Investment Strategy, The MDE Group, Inc., and Adjunct Professor of Finance, Rutgers University Graduate School of Management


More About the Author

Michael M. Pompian, CFA, CFP

Michael is Director of the Private Wealth Practice and a Principal Consultant at Hammond Associates, an investment consulting firm with over $50 billion of assets under advisement. His duties include servicing the firm's largest family office clients, as well as directing the activities of the private wealth practice. He earned an MBA in Finance from Tulane University and graduated from the University of New Hampshire with a BS degree in Management. Prior to joining Hammond Associates, Michael was a Wealth Management Advisor with Merrill Lynch and a private banker with PNC Private Bank. Prior to these positions, Michael was on the investment staff of a family office.
Michael has written and published several articles in the Journal of Wealth Management and the Journal of Financial Planning and authored a book entitled "Behavioral Finance and Wealth Management" published in March 2006 by John Wiley & Sons. His second book, "Advising Ultra-Affluent Clients and Family Offices" also published by Wiley was released in May 2009. He has been quoted in Money Magazine, The New York Times, and other media outlets including Bloomberg and CNBC. Michael is married to his wife Angela and three sons Nicholas, Alexander and Spencer.

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By HONGYANG DI on August 19, 2014
Format: Hardcover Verified Purchase
It is quite new and well protected.
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0 of 2 people found the following review helpful By Mike Ginn on March 30, 2014
Format: Hardcover Verified Purchase
very good for me, I used it to advance my own understanding of behavioral aspects involved in my own investing.
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