28
Feb
14

Understanding Investor Behavior

See on Scoop.itBounded Rationality and Beyond

Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?

Behavioral finance certainly reflects some of the attitudes embedded in the investment system. Behaviorists will argue that investors often behave irrationally, producing inefficient markets and mispriced securities – not to mention opportunities to make money. That may be true for an instant, but consistently uncovering these inefficiencies is a challenge. Questions remain over whether these behavioral finance theories can be used to manage your money effectively and economically. (To continue reading on behavioral finance, see Taking A Chance On Behavioral Finance.)

That said, investors can be their own worst enemies. Trying to out-guess the market doesn’t pay off over the long term. In fact, it often results in quirky, irrational behavior, not to mention a dent in your wealth. Implementing a strategy that is well thought out and sticking to it may help you avoid many of these common investing mistakes.

See on www.investopedia.com

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