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Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance Hardcover – October 29, 2007


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Product Details

  • Hardcover: 728 pages
  • Publisher: Wiley (October 29, 2007)
  • Language: English
  • ISBN-10: 0470516704
  • ISBN-13: 978-0470516706
  • Product Dimensions: 9.9 x 6.8 x 1.8 inches
  • Shipping Weight: 2.6 pounds (View shipping rates and policies)
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (13 customer reviews)
  • Amazon Best Sellers Rank: #363,676 in Books (See Top 100 in Books)

Editorial Reviews

Review

"It is quite simply the best and most comprehensive treatment of the subject to date."  (Financial Times, Monday 3rd December 2007)

"The Year's most exhaustive, and often entertaining, coverage of the behavioural literature."  (Financial Times, Saturday 15th December 2007)

"...one of the few 'must read' books on the topic of investing."  (The Herald - Glasgow, Saturday 2nd February 2008)

"…a fantastic insight into how markets operate… [and] one of the few "must read" on the topic of investing." (The Herald, Sat 2nd February 2008)

From the Back Cover

Behavioural investing seeks to bridge the gap between psychology and investing. All too many investors are unaware of the mental pitfalls that await them. Even once we are aware of our biases, we must recognise that knowledge does not equal behaviour. The solution lies is designing and adopting an investment process that is at least partially robust to behavioural decision-making errors.

Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance explores the biases we face, the way in which they show up in the investment process, and urges readers to adopt an empirically based sceptical approach to investing. This book is unique in combining insights from the field of applied psychology with a through understanding of the investment problem. The content is practitioner focused throughout and will be essential reading for any investment professional looking to improve their investing behaviour to maximise returns.

Key features include:

  • The only book to cover the applications of behavioural finance.
  • An executive summary for every chapter with key points highlighted at the chapter start.
  • Information on the key behavioural biases of professional investors, including The seven sins of fund management, Investment myth busting, and The Tao of investing.
  • Practical examples showing how using a psychologically inspired model can improve on standard, common practice valuation tools.

Written by an internationally renowned expert in the field of behavioural finance.


More About the Author

James Montier is a member of GMO's asset allocation team. Prior to that, he was the co-Head of Global Strategy at Société Générale and has been the top-rated strategist in the annual Thomson Extel survey for most of the last decade. Montier is the author of three market-leading books, Behavioral Finance: Insights into Irrational Minds and Markets, Behavioral Investing: A Practitioners Guide to Applying Behavioral Finance, and Value Investing: Tools and Techniques for Intelligent Investment. He is a Visiting Fellow at the University of Durham and a Fellow of the Royal Society of Arts. Montier has been described as a maverick, an iconoclast, and an enfant terrible by the press.

Customer Reviews

4.2 out of 5 stars
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See all 13 customer reviews
It is easy to read and very entertaining, nevertheless with a factual approach.
bebby
This book is a collection of short notes about psychology, investment strategy and finance.
Olivier Clementin
The author actually states that one can just open the book anywhere and read one note.
Jackal

Most Helpful Customer Reviews

49 of 51 people found the following review helpful By Olivier Clementin on December 30, 2007
Format: Hardcover
This book is a collection of short notes about psychology, investment strategy and finance. Some chapters are original, but most of them were written as Equity Strategy weeklies for clients of James Montier's then employer (Dresdner Kleinwort Benson). I had already read a few of them, including the famous one about happiness and money, which everyone in the market has read, and which I preciously retain for consultation on the gloomy days when my portfolio loses more than 1%. The notes are unedited and presented thematically, not chronologically, which is sometimes confusing. There is some repetition between chapters, and several chapters assume prior knowledge not exposed in the book, which makes the discourse not very user friendly at times. You need to have some experience of investment to benefit fully from it.

Overall the book is well written: clear, clever, entertaining and unpretentious, as is appropriate from a broker writing to clients - unlike, for instance, the unsufferably arrogant tone of Nassim Taleb, who writes on similar subjects and who, incidentally, is favorably mentioned in this book. Both Montier and Taleb define themselves as skeptical empiricists (or was that empirical skeptics ?) It reads rather quickly despite the number of pages: each chapter is preceded by a caption and a summary, which means that everything is repeated three times, and charts and graphs take up a lot of space. The book covers a lot of ground in psychology, investment process, investment strategy and ethics, including commentary on the latest research in those fields and extensive quotations from the 30s, notably from "the Masters" Keynes and Ben Graham. However, it is not really "a practitioner's guide to applying behavioural finance" since Montier's (sound) investment advice is not really based on psychology. The last parts, on ethics and happiness, are particularly original in an investment context. A higly recommended alternative to Taleb's forgettable Black Swan.
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26 of 30 people found the following review helpful By Jackal on November 17, 2008
Format: Hardcover
This is a collection of the author's newsletters to institutional clients. I'm sure they are quite interesting to read if you get them in real-time, but here you have the best of them collected in a thick volume.

This format is not ideal. The notes contain useful information and ideas but are very disconnected. The author actually states that one can just open the book anywhere and read one note. This is true, but then I would argue for reading good blogs instead. They are in real-time and all the links are fresh.

Having said this the notes contain some useful ideas so I've still given the book three stars.

UPDATE 2012. I got more interesting in a deeper understanding of the equity market so I have read and thought more about the topic. I don't think most people would find this book useful because it is too dense and disordered. However, if you are really serious about understanding the market this is a good start. However, you must prepare yourself to read some of the academic research too. So the book might refer to some very interesting research done 2004. To find out what has happened since you need to access the financial research (like Journal of Finance, Journal of Financial Economics, Financial Analysts Journal). If you do not have access (and skill to read) these publications, the book is going to be very confusing. As I pointed out in my initial review, the ordering of the material in the book is not really great. You need to do the extra work. But for all the work done by the author, I am raising my rating to four stars. Another similar book with a huge amount of work going into it is Expected Returns: An Investor's Guide to Harvesting Market Rewards (The Wiley Finance Series).
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15 of 16 people found the following review helpful By Cem Kurdoglu on July 24, 2008
Format: Hardcover
Mostly a compilation of the writer's research papers, written for an investment bank. Well, that's ok, but most of them are not edited for the book, just inserted into the book as they are. This brings a lot of repetitions and some references to papers, that you don't have access to. At least those papers could have been inserted as well. But we have to give the full credit to the writer even as this book as it is, it is a book of comprehensive research and full of insight regarding the psychology of the investing public. It also gives the reader a glimpse of all previous investment research. One of the good solid investment books.
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10 of 10 people found the following review helpful By Dimitri Shvorob on May 3, 2011
Format: Hardcover
Discussing a book about investor biases, I will admit a few *reader* biases - directed against authors who

(a) produce a book by pasting together previously published articles, and invest no effort into editing the material to reduce duplication or just weed out the typos. Here, editorial work has consisted of writing a short preface and collating the original bibliographies.

(b) go with a sexy title that happens to oversell the book's contents. I would make a guess of 200-250 pages that can be linked to "behavioral investing" - and most of those is surveying psychology research. It is interesting to hear the author's thoughts on investing - forecasting is out; Graham-Dodd and trailing multiples are in - but this is not what I paid for.

(c) do not always seem to know what they are talking about*. The FT review may call this book "the best and most comprehensive treatment of the subject to date" - better luck next time, Richard Thaler's "Advances in behavioral finance" and Hersh Shefrin's "Behavioral corporate finance" - but a look at those should tell you the qualitative difference.

I would advise readers interested in "behavioral" stuff to consult Thaler's and Shefrin's books - and to read "Behavioral investing" as a very entertaining introduction to the subject and a collection of fairly interesting investment-research essays.

* Type "Bayesian" into "Search inside" to navigate to page 116, and try to understand (and if you do, please explain to me) the author's concept of prior and posterior probabilities. If you prefer math, try keyword "acquirer" to get to page 65, read the exhibit and help me see why "by offering $60, Company T is assumed on average to be worth $30".
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