Customer Reviews

Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance (The Wiley Finance Series)

5 star:		(5)
4 star:		(4)
3 star:		(2)
2 star:		(0)
1 star:		(1)

 

 

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.

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.

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.

I have written several short reviews on trading books. The best way is to compare the score on the books I've read. Many reviews on amazon.com are just glorious 5 star reviews. I use all five categories; sorry but everything isn't "great". Books rated 5 are very good. Books rated 4 are good solid books well worth reading. Books rated 3 can be bought by some people who read a lot or have very specific needs. Books rated 1 or 2 I would not recommend buying or reading. Naturally all in my humble opinion.

I think the criticisms found in the previous reviews are valid. The book is indeed just a collection of periodic notes that were sent to clients of J. Montier's employer, Dresdner Kleinwort. And this format is at times frustrating, since occasionally these notes reference previous ones, which the reader of the book has either no access to, or which are included on later pages of the book. At other times, the format leads to redundancies, as the same point will be reiterated in different client notes.

But I could not get myself to take more than one star off, because the insights are so important, and the research presented to bolster them is very compelling. This is true both in terms of the psychological research underpinning the precepts of behavioural investing, and of the empirical research that shows the practical impact on asset prices.

I would add to the criticisms that this book seems comparatively expensive, but I would say that in this case, you get what you pay for.

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". Or, search for "Linda" to get to page 27, read the first three paragraphs of the new section and see if you understand the author's explanation about "people underweighting", etc. Linda comes back on page 84, and take 2 does better, but it's still not good. (By the way, Linda is only seen twice - but a piece of research by Bechara et al. comes back as often as Freddy Krueger).

James Montier's book is in fact a collection of articles and therefore has some redundancies by repeating the same things again and again. But...he really takes away many illusions about analysts, company meetings, portfolio management and every one's capabilities in beating the market. In short, he says that predicting the future is not possible and that we are very bad in forecasting, even more when we are "professionals", because of how our brain works. He shows how to at least try to avoid common biases and focusing on the facts (on the past).

It is easy to read and very entertaining, nevertheless with a factual approach. But be warned: as a PM you will feel the urge to stop taking calls from sales people ;-)

And I have read well over a hundred. This is not an inexpensive book, but it is worth every penny. Montier writes with wit, enthusiasm, and clarity in describing his views on the investing climate and research he has conducted on finding alpha. He has strongly held opinions which are often at odds with the industry, and he is not afraid to put forth viewpoints that render the great majority of equity analysts as useless tools of the companies they cover. As an alternative he offers a variety of relatively simple quant-based strategies which he shows have historically trounced both index-based benchmarks and stock-picking analysts. He even throws in a little philosophy at the end of the book which are truly words to live by. This is a terrific book that you will keep going back to in the years to come.

This is in my top 3 books, its a throughly orginial and well thoughtout book which outlines all the critical behavioural bias's that they we face as investors and offers some practical solutions for overcoming them. I believe that in order to outperform in today markets you need to combine technicals, fundamentals, an understanding of crowd pyschology and alos control your individual bias's.

This fine book is generally a collection of articles that appeared in the Global Equity Strategy of the investment firm Grantham, Mayo, Van Otterloo & Co. (GMO) from around 2003 thru 2007. However, do not let this deter you as the book is surely worth the time and is organized for you to determine where your interests may be centered. As such the book is organized into eight (8) sections:

Section 1: Common Mistakes and Basic Biases

Section 2: The Professionals and the Biases

Section 3: The Seven Sins of Fund Management

Section 4: Investment Process as Behavioral Defense

Section 5: Bubbles and Behavior

Section 6: Investment Myth Busters

Section 7: Corporate Governance and Ethics

Section 8: Happiness

If this book is too much, or you are a neophyte to the aspects of behavioral finance, you should review the condensed version of this book which is highly recommended. The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Book, Big Profits) The 'Little Book' series has become a great library of value investing and this recent addition is a great contribution to the collection.

This fine book is generally a collection of articles that appeared in the Global Equity Strategy of the investment firm Grantham, Mayo, Van Otterloo & Co. (GMO) from around 2003 thru 2007. However, do not let this deter you as the book is surely worth the time and is organized for you to determine where your interests may be centered. As such the book is organized into eight (8) sections:

Section 1: Common Mistakes and Basic Biases

Section 2: The Professionals and the Biases

Section 3: The Seven Sins of Fund Management

Section 4: Investment Process as Behavioral Defense

Section 5: Bubbles and Behavior

Section 6: Investment Myth Busters

Section 7: Corporate Governance and Ethics

Section 8: Happiness

If you are a neophyte to the aspects of behavioral finance, or this book is too lengthy, then you should review the condensed version of this book which is also highly recommended.

The Little Book of Behavioral Investing: How not to be your own worst enemy by James Montier

The 'Little Book' series has become a great library of value investing and this recent addition is a great contribution to the collection.