The book explores a transformative approach to finance, merging neoclassical and behavioral economics. It highlights two key shifts: neoclassical economists integrating psychological factors into their models, and behavioral economists creating a structured framework for understanding financial behavior. This paradigm shift emphasizes a more realistic and nuanced understanding of financial markets, reflecting the complexities of human decision-making.
Understanding the psychological aspects of risk management is essential for effective decision-making. The book identifies critical do's and don'ts that can help individuals and organizations create frameworks for sound judgments. It highlights that those lacking this psychological insight are more likely to encounter failures in risk management, as evidenced by major disasters like the 2008 Lehman Brothers bankruptcy and the Fukushima disaster. By recognizing and addressing psychological pitfalls, one can significantly improve risk management practices.
Focusing on the intersection of psychology and finance, this book delves into how human behavior influences financial decision-making and market dynamics. It integrates cutting-edge research and theoretical frameworks while offering practical empirical tools related to derivatives, fixed income securities, and portfolio management. Through a series of illustrative examples, readers gain a deeper understanding of investor behavior and stock market activity, making it a valuable resource for those interested in behavioral finance.
"Shefrin synthesizes a wealth of research and observations about human behavior and financial anomalies into a broad and deep perspective on financial markets. No other book so splendidly lays out the fundamentals of behavioral finance."--Robert Shiller, Stanley B. Resor Professor of Economics, Cowles Foundation for Research in Economics, Yale University Even the best Wall Street investors make mistakes. No matter how savvy or experienced, all financialpractitioners eventually let bias, overconfidence, and emotion cloud their judgement and misguide their actions. Yet most financial decision-making models fail to factor in these fundamentals of human nature. In Beyond Greed and Fear, the most authoritative guide to what really influences thedecision-making process, Hersh Shefrin uses the latest psychological research to help us understand the human behavior that guides stock selection, financial services, and corporate financial strategy. Beyond Greed and Fear illuminates behavioral finance for today's investor. It will help practitioners to recognize--and avoid--bias and errors in their decisions, and to modify and improve their overall investment strategies.
Focusing on the psychological factors influencing climate policy, the author explores the significant disconnect between actual policies and the recommendations of neoclassical economists. While acknowledging that neoclassical models may have unrealistic elements, the work emphasizes that the more pressing issue lies in the psychological pitfalls that affect political decision-making. This analysis poses the "big behavioral question," investigating the troubling behaviors that contribute to the substantial gap between existing policies and even the most modest economic prescriptions.
