Sublime

There is a kind of symbiosis between the irrational traders and the skilled ones—just as, in a poker game, good players need some fish at the table to make the game profitable to play in. In the financial literature, these irrational traders are known as “noise traders.” As the economist Fisher Black wrote in a 1986 essay simply called “Noise”: Noi

Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, “Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias,” Journal of Economic Perspective 5, no. 1 (1991): 193– 206, http://users.tricity.wsu.edu/~achaudh/kahnemanetal.pdf

I love Voltaire’s observation that “History never repeats itself; man always does.” It applies so well to how we behave with money.

If you grew up when inflation was high, you invested less of your money in bonds later in life compared to those who grew up when inflation was low. If you happened to grow up when the stock market was strong, you inves

What matters here is the asymmetry between the cost and the potential benefit. After all, I also have the right—but not the obligation—to go on an online shopping spree, or get McDonald's delivered to my door. I have millions of options at my fingertips at all times. The difference is that there's no positive asymmetry: the rewards are usually mode

tax

In today’s stock market, most trades are made with someone else’s money (in Druckenmiller’s case, mostly George Soros’s). The 1990s and 2000s are sometimes thought of as the age of the day trader. But holdings by institutional investors like mutual funds, hedge funds, and pensions have increased at a much faster rate (figure 11-9). When Fama drafte

Some economists are already working on that. They are using this brain-imaging data to support a new political philosophy known as asymmetric paternalism. That's a fancy name for a simple idea: creating policies and incentives that help people triumph over their irrational impulses and make better, more prudent decisions. Shlomo Benartzi and Richar