Table of Contents |
| Acknowledgments | xv |
pt. One | Foundations of Investor Behavior | |
ch. 1 | Investor Behavior: An Overview / Victor Ricclardl | 3 |
| Introduction | 3 |
| Organization of the Book | 11 |
| Summary | 20 |
| References | 21 |
| About the Authors | 23 |
ch. 2 | Traditional and Behavioral Finance / Lucy F. Ackert | 25 |
| Introduction | 25 |
| Traditional Finance | 26 |
| Behavioral Finance | 31 |
| Summary | 39 |
| Discussion Questions | 39 |
| References | 39 |
| About the Author | 41 |
ch. 3 | Behavioral Economics, Thinking Processes, Decision-Making, and Investment Behavior / Morris Altman | 48 |
| Introduction | 43 |
| Behavioral Economics, Heuristics, and Decision-Making | 44 |
| Investment Heuristics and Investing in Financial Assets | 45 |
| The Trust Heuristic and Decision-Making | 48 |
| Other Critical Decision-Making Heuristics | 49 |
| Rational Investor Decision-Making in a World of Complex Information | 56 |
| Summary | 58 |
| Discussion Questions | 59 |
| References | 59 |
| About the Author | 61 |
pt. Two | Personal Finance Issues | |
ch. 4 | Financial Literacy and Education / Sandra J. Huston | 65 |
| Introduction | 65 |
| Examples of Financial Literacy Measures | 68 |
| Financial Literacy and Behavior | 71 |
| Financial Literacy Education | 75 |
| Summary | 77 |
| Discussion Questions | 78 |
| References | 78 |
| About the Authors | 81 |
ch. 5 | Household Investment Decisions / Vickl L. Bogan | 83 |
| Introduction | 83 |
| Financial Market Participation | 83 |
| Market Friction Effects on Household Investment Behavior | 85 |
| The Effects of Behavioral Biases on Household Investment Behavior | 87 |
| Summary | 93 |
| Discussion Questions | 94 |
| References | 94 |
| About the Author | 98 |
ch. 6 | Personality Traits / Robert B. Durand | 99 |
| Introduction | 99 |
| A Structural Model of Personality | 100 |
| Risk-Taking Behavior | 103 |
| Overconfidence | 104 |
| Personality and Gender | 105 |
| Personality as a Guide for Investors | 107 |
| Summary | 108 |
| Discussion Questions | 109 |
| References | 109 |
| About the Authors | 114 |
ch. 7 | Demographic and Socioeconomic Factors of Investors / James Farrell | 117 |
| Introduction | 117 |
| Literature Review | 118 |
| Case Study: The Florida Department of Education Employees | 122 |
| Summary | 131 |
| Discussion Questions | 132 |
| References | 133 |
| About the Author | 134 |
ch. 8 | The Effect of Religion on Financial and Investing Decisions / Mouna Jiassi | 185 |
| Introduction | 135 |
| Religions and Economic Factors: Dependence or Bifurcation? | 136 |
| Religion and Individual Investing Behavior | 138 |
| Summary | 147 |
| Discussion Questions | 147 |
| References | 147 |
| About the Authors | 151 |
ch. 9 | Money and Happiness: Implications for Investor Behavior / Jing Jian Xiao | 153 |
| Introduction | 153 |
| Can Money Buy Happiness? | 154 |
| Can Happiness Buy Money? | 162 |
| Implications for Investor Behavior | 164 |
| Summary | 165 |
| Discussion Questions | 165 |
| References | 166 |
| About the Author | 169 |
ch. 10 | Motivation and Satisfaction / Lewis J. Altlest | 171 |
| Introduction | 171 |
| Classical Economic Motivation | 171 |
| Behavioral Economic Motivation | 173 |
| Maslow's Hierarchy of Needs | 175 |
| Criticism of Maslow's Hierarchy of Needs | 177 |
| Higher Level Motivation | 179 |
| Humanism | 181 |
| Maslow and Investment Management | 182 |
| Personal Finance Integration | 183 |
| Summary | 185 |
| Discussion Questions | 186 |
| References | 187 |
| About the Author | 188 |
pt. Three | Financial Planning Concepts | |
ch. 11 | Policy-Based Financial Planning: Decision Rides for a Changing World / Elissa Bule | 191 |
| Introduction | 191 |
| Managing Behavioral Biases in the Financial Planning Engagement | 194 |
| A Process for Developing Financial Planning Policies | 195 |
| Applicability of Financial Planning Policies | 199 |
| Policy-Based Financial Planning: The Strategic Perspective | 201 |
| Example of Policies Derived through Stochastic Modeling | 202 |
| Sample Case Applications | 203 |
| Summary | 205 |
| Discussion Questions | 206 |
| References | 206 |
| About the Authors | 207 |
ch. 12 | Financial Counseling and Coaching / Kristy L. Archuleta | 209 |
| Introduction | 209 |
| Financial Counseling: A Historical Perspective | 210 |
| Theoretical Approaches: A Financial Counseling Perspective | 215 |
| Financial Counseling in the Twenty-First Century | 221 |
| Summary | 223 |
| Discussion Questions | 224 |
| References | 225 |
| About the Authors | 226 |
ch. 13 | Financial Therapy: De-Biasing and Client Behaviors / Jerry E. Gale | 227 |
| Introduction | 227 |
| What Is Financial Therapy? | 229 |
| Brief History of Financial Therapy | 231 |
| Theoretical Foundations for Financial Therapy | 232 |
| The Practice of Financial Therapy | 237 |
| Future Research and Practice | 240 |
| Summary | 240 |
| Discussion Questions | 241 |
| References | 241 |
| About the Authors | 243 |
ch. 14 | Transpersonal Economics / Renee M. Snow | 245 |
| Introduction | 245 |
| Historical and Spiritual Overview of Money | 248 |
| The Western Eco/House | 252 |
| An Alternative Perspective | 254 |
| The Open Eco in Financial Planning | 256 |
| Summary | 260 |
| Discussion Questions | 261 |
| References | 261 |
| About the Author | 264 |
ch. 15 | Advising the Behavioral Investor: Lessons from the Real World / Gregg S. Fisher | 285 |
| Introduction | 265 |
| Risk, Return, and the Investor: A Complex Relationship | 266 |
| Investments with People Problems | 269 |
| The Impact of Investor Behavior on Portfolios | 272 |
| How Advisors Can Help the Behavioral Investor | 275 |
| Turning Bias into Benefit: How to Profit from Investor Behavior | 278 |
| Summary | 281 |
| Discussion Questions | 281 |
| References | 282 |
| Disclosure | 283 |
| About the Author | 283 |
ch. 16 | Retirement Planning: Contributions from the Field of Behavioral Finance and Economics / Rassoul Yazdlpour | 285 |
| Introduction | 285 |
| A Life Cycle Financial Planning and Wealth Management Model | 286 |
| Demographic and Macroeconomic Context | 287 |
| Biases, Heuristics, and Framing Effects on Retirement Planning | 288 |
| Hyperbolic Discounting | 291 |
| The Role of the Brain in Financial Decision-Making | 293 |
| Financial Decision-Making Quality and Age | 295 |
| The Role of Self-Awareness and Self-Control | 296 |
| Trust and Retirement Saving and Planning: The Basics | 297 |
| Trust and Retirement Saving and Planning: The Decision | 298 |
| Trust-Based Implications for Retirement Saving and Planning | 299 |
| Discussion Questions | 302 |
| References | 303 |
| About the Authors | 305 |
ch. 17 | Knowing Your Numbers: A Scorecard Approach to Improved Medical and Financial Outcomes / Stephanie Gati | 307 |
| Introduction | 307 |
| The Need for Better Control of Chronic Diseases | 309 |
| The Scorecard Approach | 310 |
| Target Population and Advantages | 311 |
| Content of the Take Care Scorecard | 311 |
| Considerations for Health and Financial Literacy Scorecards | 313 |
| Limitations | 318 |
| Implications for Financial Literacy | 318 |
| Summary | 319 |
| Discussion Questions | 320 |
| References | 320 |
| About the Authors | 324 |
| Acknowledgment | 324 |
pt. Four | Investor Psychology | |
ch. 18 | Risk Perception and Risk Tolerance / Douglas Rice | 827 |
| Introduction | 327 |
| Risk Perception | 328 |
| The Relationship between Risk Perception and Risk Tolerance | 329 |
| An Overview of Risk Tolerance | 329 |
| Measurement of Risk Tolerance | 332 |
| The Role of Emotion in Risk Perception and Risk Tolerance | 334 |
| Risk-Taking Behavior: The Influence of Market Moods, Business Cycles, and Economic Shocks | 336 |
| Unresolved Issues in the Risk Domain | 340 |
| Summary | 341 |
| Discussion Questions | 342 |
| References | 342 |
| About the Authors | 345 |
ch. 19 | Emotions In the Financial Markets / Richard Fairchild | 347 |
| Introduction | 347 |
| Behavioral Finance and Prospect Theory | 348 |
| Emotions | 350 |
| Emotions in the Financial Markets | 351 |
| Emotional Finance and Unconscious Emotions | 353 |
| Emotional Corporate Finance---A Formal Model | 356 |
| Summary | 360 |
| Discussion Questions | 361 |
| References | 361 |
| About the Author | 364 |
ch. 20 | Human Psychology and Market Seasonality / Lisa A. Kramer | 365 |
| Introduction | 365 |
| Moods, Emotions, and Sentiment | 366 |
| Weather, Mood, and Markets | 366 |
| Daylight, Mood, and Markets | 367 |
| Daylight Saving Time Changes, Mood, and Markets | 373 |
| Elation, Deflation, and Markets | 374 |
| Summary | 376 |
| Discussion Questions | 377 |
| References | 377 |
| About the Author | 380 |
ch. 21 | Neurofinance / Richard L. Peterson | 381 |
| Introduction | 381 |
| Neuroscience Primer | 382 |
| Research Methods | 385 |
| The Neuroscience of Financial Decision-Making | 387 |
| The Implications of Neurofinance Research for Practitioners | 395 |
| Summary | 397 |
| Discussion Questions | 398 |
| References | 398 |
| About the Author | 401 |
ch. 22 | Diversification and Asset Allecation Puzzles / Dimitris Georgarakos | 403 |
| Introduction | 403 |
| Household Stock Market Participation | 404 |
| Changes in Household Portfolios across Time | 407 |
| Differences in Household Portfolios across Countries | 408 |
| Portfolio Diversification | 410 |
| Household Stock Trading Behavior | 412 |
| Summary | 415 |
| Discussion Questions | 416 |
| References | 416 |
| About the Author | 420 |
ch. 23 | Behavioral Pertfolio Theory and Investment Management / Emanuela Trifan | 421 |
| Introduction | 421 |
| Prospect Theory and Expected Utility Theory | 421 |
| Safety-First Portfolio Theory | 426 |
| SP/A Theory | 427 |
| Behavioral Portfolio Theory | 430 |
| Behavioral Asset Pricing Model | 432 |
| The BAPM, CAPM, and Three-Factor Model | 432 |
| Summary | 435 |
| Discussion Questions | 435 |
| References | 435 |
| About the Authors | 438 |
ch. 24 | Post-Crisis Investor Behavior: Experience Matters / Joseph V. Rizzi | 439 |
| Introduction | 439 |
| Behavioral Finance Framework | 440 |
| History Dependent Risk Tolerance: The Collective Memory Hypothesis | 446 |
| Summary | 452 |
| Discussion Questions | 453 |
| References | 453 |
| About the Author | 455 |
pt. Five | Trading and Investing Psychology and Strategies | |
ch. 25 | The Psychology of Trading and Investing / Thomas Oberlechner | 459 |
| Introduction | 459 |
| Personality Variables | 461 |
| Affect and Cognition | 463 |
| News, Rumors, and Market Mood | 470 |
| Summary | 471 |
| Discussion Questions | 471 |
| References | 472 |
| About the Authors | 476 |
ch. 26 | The Surprising Real World of Traders' Psychology / Andrew Menaker | 477 |
| Introduction | 477 |
| What Science Reveals about How People Think | 478 |
| I Need to Be a Hero Again | 485 |
| The Heart of a Quant | 487 |
| Summary | 489 |
| Discussion Questions | 490 |
| References | 490 |
| About the Authors | 493 |
ch. 27 | Trading and Investment Strategies in Behavioral Finance / John M. Longo | 495 |
| Introduction | 495 |
| Distinction between Trading and Investment Strategies | 496 |
| Active versus Passive Investment Strategies and Behavioral Finance | 496 |
| Average Investors Suffer from Behavioral Biases | 498 |
| Problems with Traditional Investment Strategies | 499 |
| Short-Term Behaviorally Based Trading Strategies | 503 |
| Long-Term Behaviorally Based Investment Strategies | 508 |
| Current and Future Trends in Behavioral Finance Strategies | 509 |
| Summary | 510 |
| Discussion Questions | 511 |
| References | 511 |
| About the Author | 512 |
pt. Six | Special Investment Topics | |
ch. 28 | Ethical and Socially Responsible Investing / Julia M. Puaschunder | 515 |
| Introduction | 515 |
| Socially Responsible Investment | 515 |
| Historical Emergence | 517 |
| International Differences | 520 |
| Institutional Harmonization of FSR | 523 |
| SRI in the Post 2008-2009 World Financial Crisis Era of Globalization | 524 |
| Summary | 525 |
| Discussion Questions | 527 |
| References | 527 |
| About the Author | 532 |
ch. 29 | Mutual Funds and Individual Investors: Advertising and Behavioral Issues / John A. Haslem | 533 |
| Introduction | 533 |
| Advertising and Performance | 534 |
| Advertising, Expenses, and Flows | 535 |
| Advertising, Emotions, and Choice | 536 |
| Behavioral Persuasion In Advertising and Choice | 539 |
| Education, Financial Knowledge, and Choice | 540 |
| Emotions, Behavior, and Choice | 542 |
| Emotions, Behavioral Finance, and Choice | 543 |
| Financial Literacy and Active Management | 544 |
| Price and Performance Sensitivity and Repricing | 546 |
| Sentiment Contrarian Behavior and Actual Performance | 548 |
| Summary | 550 |
| Discussion Questions | 552 |
| References | 552 |
| About the Author | 553 |
ch. 30 | Real Estate Investment Decision-Making in Behavioral Finance / Hilla Sktha | 555 |
| Introduction | 555 |
| The Real Estate Market and the General Economy | 556 |
| Real Estate Market and Financial Market | 556 |
| Inefficiencies and the Real Estate Markets | 557 |
| Observed Inefficiencies in Real Estate Markets | 563 |
| Summary | 569 |
| Discussion Questions | 569 |
| References | 570 |
| About the Authors | 572 |
| Answers to the Discussion Questions | 573 |
| Index | 815 |