Investor Behavior: The Psychology of Financial Planning and Investing

PRAISE FOR INVESTOR BEHAVIOR

As behavioral concepts pervade more and more areas of practical finance, it can be increasingly difficult to keep track of the explosion of new ideas and applications. Investor Behavior draws together a huge range of specialist thinkers and practitioners to help us navigate, and apply, this burgeoning field to improving real world financial decision making.

--Greg B. Davies, Head of Behavioral Finance, Barclays

Baker and Ricciardi have put together the first scholarly book that captures the psychology, cognitive errors, and behaviors that permeate the financial planning industry. Financial planning is not just about efficient portfolios. It is also about client motivation and happiness when they often don't really know what they want. This book reveals the emotions, beliefs, personality, and biology that impact their decisions. Planners can know themselves and their clients better. Each chapter is a must read for all financial planners, financial advisors, and wealth managers... or anyone wanting to enter the industry.

--John Nofsinger, Seward Chair in Finance, College of Business and Public Policy, University of Alaska Anchorage

Professors Baker and Ricciardi have provided an essential book on the emerging trends in investment behavior as it relates to the dynamic nature of the investment management industry. Readers of Investor Behavior: The Psychology of Financial Planning and Investing are treated to a deep treatment of empirical evidence and current literature on the subject of behavioral finance in an easy-to-read manner. The collection of academic and practitioner talent contributing to this book is to my knowledge unprecedented. I highly recommend the book to both investors and financial market participants.

--Michael Pompian, Author of Behavioral Finance and Wealth Management

Readers of this book should come away with an appreciation of the factors that make the tasks of financial planning and investing so very complicated. Baker and Ricciardi have assembled a volume that documents our existing knowledge about investing from so many different angles. Beyond broad disciplinary perspectives such as economics, psychology, sociology, and neurology, the book informs us about all kinds of phenomena impacting investment behavior, such as reliance on fast and frugal heuristics, biases stemming from reliance on heuristics, seasonal affective disorder, personality types, demographics, and religion. Of special interest are the chapters that discuss how this interdisciplinary perspective can translate into meaningful advice to help investors make sensible decisions in a complex world.

--Hersh Shefrin, Mario L. Belotti Professor of Finance, Santa Clara University

The past several decades have seen remarkable contributions to knowledge about investor psychology and behavior within the burgeoning field of behavioral finance. This comprehensive book gives readers a solid grounding in theoretical and practical insights from this research essential for wise investment decision making.

--Paul Slovic, Professor of Psychology, University of Oregon

Star Treks' Mister Spock was the rational, unemotional agent whom Captain Kirk of the Starship Enterprise depended on. Homer Simpson was the opposite, hardly the person to whom you would entrust your well-being. Spock would embrace this book. Homer, perhaps pried by a Duff Beer, would discover that relying on this book to improve his choices is his only choice for Marge and the kids. Baker and Ricciardi have done a masterful job of selecting learned authors, selecting the right material for comprehensive coverage. The backbone of sound financial planning and investing, namely to understand how and why mistakes are propelled by psychology, is revealed in the pages of this book. Teachers, students, planners, investors, no matter how educated, should benefit from this book. Practicing its lessons and wisdom will make you infinitely better off for it.

--Arnold Wood, President and Chief Executive Officer, Martingale Asset Management