Summary of Hersh Shefrin's Beyond Greed and Fear EPUB

Please note: This is a companion version & not the original book.

Book Preview: #1 The field of behavioral finance is the application of psychology to financial behavior. It examines the behavior of practitioners and how they make the same mistakes repeatedly.

#2 The first three behavioral themes are heuristic-driven bias, frame dependence, and inefficient markets. Heuristic-driven bias means that practitioners rely on rules of thumb when processing data. Frame dependence means that practitioners’ perceptions of risk and return are highly influenced by how decision problems are framed.

#3 The field of finance, which is the study of investments and their effects, is heavily influenced by behavioral phenomena. The areas of portfolio theory, asset pricing, corporate finance, and the pricing of options are all areas of finance that are heavily influenced by behavioral phenomena.

#4 The pick-a-number game is a simple example used to demonstrate the errors that people make when making decisions. If you are playing to win, you need to understand how the other players are thinking. If everyone thinks along these lines, the winning entry will not be 1, but 13. 6.