Behavioural finance has moved into the mainstream. In a guest post over at Monevator, Tim from The Psy-Fi Blog gets us up to speed.
Noble Prize winning committees aren’t renowned for consistency. Giving Barack Obama the Peace Prize for not being George W. Bush is a triumph of hope, but hardly based on rational analysis.
We might also wonder if the selection panel got its wires crossed when it awarded the Economics prize to a psychologist.
But it wasn’t just any old shrink who got the bauble. It was Daniel Kahneman, half of the dynamic duo that invented the whole topic of behavioural finance.
The other half, Amos Tversky, died in 1996. Between them, Tversky and Kahneman pump primed a change in the way we expect stocks to behave.
Outside credit rating agencies, it’s no longer enough to assume we can predict market movements on the basis of number crunching on a grand scale.
Now we need to take our own mental confusion into account...
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The Psy-Fi Blog
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