Summary of Beyond Greed and Fear

Understanding Behavioral Finance and the Psychology of Investing

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Beyond Greed and Fear book summary
Fear, greed, hope: emotions rule investment picks more than market theorists admit. To feel good, avoid costly mistakes.

Rating

9 Overall

9 Applicability

9 Innovation

9 Style

Recommendation

If only you could bring yourself to ditch those losers from your portfolio, and hang onto your winners. If you can, you are unusual. Unprofitable habits afflict nearly all investors, beginners and pros alike, writes Hersh Shefrin in this intriguing study of the role of emotions in investing. Shefrin balances the jargon with plenty of real-world examples and wisely cautions you not to delude yourself into thinking that his tips will make you rich. Viewing investing through the prism of behavior finance, he analyzes emotionally-laden decisions made by private investors, money managers, bankers and other professionals handling stocks and various other forms of investments including options, foreign currency and futures. Shefrin offers juicy case histories, so his tour of behavioral finance is mostly enjoyable and useful. At times, though, the book bogs down in the author’s attempts to legitimize behavior finance, a relatively new school of thought. For instance, he charges failed investors with committing "heuristic bias" or falling prey to "representativeness." That quibble aside, getAbstract.com recommends this intriguing tome to investment decision makers on any level. Whether you are running billions or managing a retirement account (which, as Shefrin notes, most people do badly), maybe this book will buffer you against emotional investing and pocketbook pain.

In this summary, you will learn

  • What role emotions play in investment decisions
  • What mistakes both professional and novice investors make
  • Why markets are inherently inefficient
 

Summary

Inefficient Markets
Forget any notion you may have that financial markets are efficient. Traditional financial theory teaches that investments are priced to their true value. This happens because so much information is available about stocks and so many willing buyers and sellers participate...
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About the Author

Hersh Shefrin teaches at Santa Clara University, where he holds the Mario L. Belotti chair in finance at the Leavey School of Business.


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