An Introduction to Behavioral Finance and Asset Management

A Guide for Students and Professionals in Wealth Management

Author: Yannick Coulon

Publisher: Springer Nature Switzerland

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

Table of Contents

About this book

This book introduces readers to behavioral finance applied to wealth management. It explains essential behavioral biases and their damaging consequences including financial bubbles, and Prospect Theory. Additionally, it establishes fundamental rules for improving the structuring and protection of wealth. Despite its practical and didactic aspects, the book is accessible without sacrificing the depth of the subject. Aimed at students, asset managers, financial advisors, and investors, the book explores the behavioral approach on financial decisions and examines the psychology around investor behavior.

Frontmatter

Chapter 1. Introduction to Behavioral Finance

Abstract

This chapter establishes the differences between classical and behavioral finance. The lack of rationality and market efficiency are powerful factors justifying behavioral finance, as are financial bubbles.

Yannick Coulon

Chapter 2. Behavioral Questionnaire

Abstract

Take a few minutes to answer this questionnaire spontaneously, without any help. There are no right or wrong answers, just your answers. The questions require some concentration, so read them carefully. They will help you understand the following chapters.

Yannick Coulon

Chapter 3. Essential Behavioral Biases

Abstract

Behavioral biases lead to poor economic and financial decisions, which is why it is paramount to be aware of them. What is the point of focusing on taxation, law, or finance if, in the end, the decision to buy or sell is based on purely emotional and subjective criteria? The author presents the most common and harmful behavioral biases.

Yannick Coulon

Chapter 4. The Prospect Theory

Abstract

This chapter deals with Prospect Theory, the theoretical part of Behavioral Finance. A few complex equations are presented and illustrated. The last part of the chapter is more accessible, with some interesting applications in financial marketing.

Yannick Coulon

Chapter 5. Essential Principles of Wealth Management Undermined

Abstract

The diversification advocated by Harry Markovitz is still relevant at the theoretical level. However, numerous empirical studies show that it is insufficiently applied in portfolios. What are the powerful obstacles to efficient and optimal diversification? This chapter lists potential suspects.

Yannick Coulon

Chapter 6. Investment Solutions

Abstract

A structured asset organization can significantly reduce the harmfull effects of behavioral biases. Some investment methods can mitigate or accomodate them such as a core-satellite asset construction, hedged equities with put options, automatic rebalancing, principal protected notes or an investment thesis for risky bets.

Yannick Coulon

Chapter 7. Conclusion

Abstract

Patience is the only way to achieve long-term performance. Strategic asset allocation must be planned for the long term. A strong financial discipline is necessary to mitigate most behavioral biases. A few recommendations for advisors and investors are listed.

Yannick Coulon

Chapter 8. Behavioral Finance Test

Abstract

Test your Behavioral Finance and Asset Management knowledge in 10 Questions. After reading the book, you will find them easy. The answers appear immediately after.

Yannick Coulon

Backmatter

Title: An Introduction to Behavioral Finance and Asset Management
Author: Yannick Coulon
Publisher: Springer Nature Switzerland
Electronic ISBN: 978-3-031-72553-1
Print ISBN: 978-3-031-72552-4
DOI: https://doi.org/10.1007/978-3-031-72553-1