Research

The field of behavioural finance borrows from a host of disciplines like psychology, neural science, evolutionary biology and others to attempt to understand the behaviour of investors and markets. The field tries to understand why investors create market inefficiencies with the errors they make. We as practitioners attempt to systematically exploit these errors and inefficiencies on behalf of our clients.

Some of the more surprising findings from the field of behavioural finance include:

  1. Seasonal Affectiveness Disorder (SAD) affects market returns. A study demonstrated how an investor can improve returns by moving from Northern Hemisphere markets to Southern Hemisphere markets to take advantage of seasonal inefficiencies.
  2. Men tend to be more overconfident than women and that overconfidence has a real cost. Over confident investors trade more and earn less. In terms of success at trading, single men do worse, married men do slightly better, married women do slightly better still and single women perform best.
  3. Left to their own devices, individual investors in discount brokerage accounts tend to do very badly. They overtrade, the stocks they buy underperform the stocks they sell, they ignore the effect of taxes and fees in their performance analysis. In other words, billions of dollars are being squandered by investors.
  4. Often the most emotionally painful investments are the best ones. Maybe that ‘inner voice’ isn’t always right.
  5. Precisely the evolutionary environment set us up for failure in financial markets: many of those things which made us the most successful species on the planet harm us when it comes to managing our wealth.

To learn more about the research or learn more about our experts, please review the following partial biography:

Dan Ariely. Author of “Predictably Irrational”. Professor Sloan School of Management, MIT http://web.mit.edu/ariely/www/MIT/

Shlomo Benartzi, Professor and Co-Chair of Behavioural Decision Marketing Group http://www.anderson.ucla.edu/x1545.xml

Terry Burnham Author “Mean Markets and Lizard Brains”, Co-Author (Jay Phelan) “Mean Genes”. Professor Economics, Harvard University. http://www.meangenes.org/authors/

Stephen Jarislowsky Professional investor/shareholder activist. Founder of money management firm “Jarislowsky Fraser”. http://www.jfl.ca/

Lisa Kramer, Professor Finance, University of Toronto, http://www.chass.utoronto.ca/~lkramer/

Margaret Neale, Professor Organizational Behaviour, Stanford Graduate School of Business https://gsbapps.stanford.edu/facultybios/biomain.asp?id=47242109

Terry Odean, Professor Finance, Haas School of Management, Berkeley http://faculty.haas.berkeley.edu/odean/

Jay Phelan, Co-Author “Mean Genes” (with Terry Burnham), Professor Biology UCLA

L.S. (Al) Rosen, Founder “Rosen and Associates Limited”, Forensic Accountant, Shareholder activist. Professor Accounting (ret), Schulich School of Business http://www.rosen-associates.com/index.shtml

Mark Rosen, Director of Research “Accountability Research Corporation”

Hersh Shefrin Author “Beyond Greed and Fear: Understanding Behavioural Finance and the Psychology of Investing”, Author “Behavioural Finance”, Author “Behavioural Corporate Finance”. Professor Finance Santa Clara University http://www.scu.edu/business/finance/faculty/shefrin.cfm

Richard Thaler, Co-Author (with Cass Sunstein) “Nudge: Improving Decisions about Health, Wealth and Happiness”, Author “The Winner’s Curse” Partner “Fuller and Thaler”, Professor of Behavioural Science and Economics http://www.chicagogsb.edu/faculty/bio.aspx?&min_year=20074&max_year=20083&person_id=31455