The basic premise of the attention pillar is that we make probability-insensitive judgments because of our reliance on information that is vivid over information that is factually accurate.

Hardcore passive management enthusiasts overemphasize the overarching pull toward efficiency and mistake the general trend for the Gospel Truth. In so doing, they overlook valuable opportunities for return enhancement that are available to behavioral investors. Advocates for traditional active management are quick to point out the behavioral

It is heartening to think of the sort of noble people we would be if we adhered to the expectations of neoclassical economic theory. We would make prudent nutritional choices that nurtured our long-term health. We would ignore the daily ups and downs of the stock market in favor of a longer-term view aligned with our personal goals and needs. And

The massive shift to index funds over the past 15 years or so drove the valuations of the largest index components to levels which guarantee poor returns going forward. Poor returns, in turn, will guarantee these inflows will turn to outflows and the virtuous cycle will become a vicious one.” Or as Nassim Taleb says, “We have been fragilizing the

The irony of obsessive loss aversion is that our worst fears become realized in our attempts to manage them. Behavioral investors take a clear-eyed view of risk and uncertainty in a world that distorts them out of fear, and their lives are richer for it.

This tendency for beliefs to get even stronger in the face of contradictory evidence, known as the backfire effect, is even more pronounced when the information presented is ambiguous or unclear. A Stanford study presented participants with strong feelings about the death penalty with a sheet that set forth evidence both for and against capital

The gentleman, after a brief thanks for the presentation, asked for my opinion of Apple stock as it made up a large portion of his $2 million portfolio. Now, I held the stock in my separate account strategies at the time and it was the highest rated stock in my investable universe at that very moment; I could not have been more bullish on Apple.

Of the 15,000 studies taken into consideration, a paltry .013% of them (that is, 200) met the rigorous standards for inclusion in the meta-analysis.

Throughout this book, I have professed a number of my more controversial beliefs about how asset managers should go about their business. I believe that a systematic approach to investing is optimal and that manager discretion should be very limited. For one, I believe that managers should be paid for the degree to which they adhere to a process