We use cookies to enhance your experience on our website. By continuing to use our website, you are agreeing to our use of cookies. You can change your cookie settings at any time. Find out more
Cover

Finance for Normal People

How Investors and Markets Behave

Meir Statman

Publication Date - May 2017

ISBN: 9780190626471

488 pages
Hardcover
6-1/8 x 9-1/4 inches

In Stock

Retail Price to Students: $34.95

Description

Finance for Normal People teaches behavioral finance to people like you and me - normal people, neither rational nor irrational. We are consumers, savers, investors, and managers - corporate managers, money managers, financial advisers, and all other financial professionals.

The book guides us to know our wants-including hope for riches, protection from poverty, caring for family, sincere social responsibility and high social status. It teaches financial facts and human behavior, including making cognitive and emotional shortcuts and avoiding cognitive and emotional errors such as overconfidence, hindsight, exaggerated fear, and unrealistic hope. And it guides us to banish ignorance, gain knowledge, and increase the ratio of smart to foolish behavior on our way to what we want.

These lessons of behavioral finance draw on what we know about us-normal people-including our wants, cognition, and emotions. And they draw on the roles of these factors in saving and spending, portfolio construction, returns we can expect from our investments, and whether we can hope to beat the market.

Meir Statman, a founder of behavioral finance, draws on his extensive research and the research of many others to build a unified structure of behavioral finance. Its foundation blocks include normal behavior, behavioral portfolio theory, behavioral life-cycle theory, behavioral asset pricing theory, and behavioral market efficiency.

Features

  • Offers behavioral finance as a unified structure that incorporates parts of standard finance, replaces others, and includes bridges between theory, evidence, and practice
  • The first book to offer a unified structure of finance, beyond cognitive and emotional errors
  • Chapters discuss the crisis of retirement savings and personal money management and how to address the perennial problem of insufficient saving

About the Author(s)

Meir Statman is the Glenn Klimek Professor of Finance at the Leavey School of Business, Santa Clara University. His research on behavioral finance has been supported by the National Science Foundation, CFA Institute, and Investment Management Consultants Association (IMCA) and has been published in the Journal of Finance, Financial Analysts Journal, Journal of Portfolio Management, and many other publications. A recipient of three Baker IMCA Journal Awards, the Moskowitz Prize for Best Paper on Socially Responsible Investing, and three Graham and Dodd Awards. Statman consults with many investment companies and presents his work to academics and professionals in the U.S. and abroad.

Reviews

"As Pogo used to say: 'We have met the enemy and we are it.' By elucidating clearly the teachings of behavioral finance, Meir Statman shows us how to avoid the common errors investors make and how to become smarter investors." -- Burton G. Malkiel , author of A Random Walk Down Wall Street, 11th ed. Paper, 2016

"Meir Statman describes investors as normal in this insightful book, not irrational as in earlier behavioral finance, and not rational wealth-maximizing caricatures as in typical textbooks. Normal investors underlie Statman's innovative approach to portfolios, saving and spending, asset pricing, and market efficiency." -- Harry Markowitz, Winner, Nobel Prize in Economics, and Professor of Finance at the Rady School of Management

"Meir Statman, a leading light of behavioral finance, describes lucidly and vividly the cognitive and emotional errors underlying the maxim "If you don't know who you are, the stock market is an expensive place to find out." Readers of this behaviorally savvy book will be well prepared to avoid those errors." -- Paul Slovic, Professor of Psychology, University of Oregon, and author of The Perception of Risk

"One of the pioneers of behavioral finance, Meir Statman has done a great service for investors, portfolio managers, and financial regulators with this insightful volume. If you've ever wondered why you sold too early or why you got in too late, you need to read this book!" -- Andrew Lo, Charles E. and Susan T. Harris Professor of Finance, MIT Sloan School of Management

"Yes, to be successful, we need to make good investments, but then we need to be good investors, exhibiting the virtues of simplicity, broad diversification, and low investment costs, and focusing on the long term. This fine book is welcome help." -- John C. Bogle, founder of Vanguard and the first index mutual fund

"Finance for Normal People shows that self-knowledge is the most valuable investment skill of all. Meir Statman - one of the founders of Behavioral Finance - uses fascinating new research about market imperfections and the psychology of decision-making to navigate normal people through the complexities of investing. The evidence is compelling and the writing is lucid." - William N. Goetzmann, Edwin J. Beineke Professor of Finance and Management Studies, Yale School of Management

"Meir Statman has pioneered the integration of behavioral research with financial analysis. Finance for Normal People makes the insights of behavioral finance available to the ordinary investors, helping them to understand markets - and themselves." - Baruch Fischhoff, Howard Heinz University Professor, Carnegie Mellon University, and co-author of Risk - A Very Short Introduction

"Standard finance theory assumes that investors and traders are rational super-computers, able to take into account all available information and process it logically. But, investors are normal, with normal wants and normal susceptibility to cognitive and emotional errors. Professor Statman has written an excellent guide to how finance actually works in practice-not just in theory. Yet, despite Statman's real-world approach, his book remains rigorous and evidenced by the very best research." - Alex Edmans, Professor of Finance at London Business School

"Behavioral finance pioneer Meir Statman describes normal people who care about investment profits but also about how investments make them look and feel. Normal people strive to reach many investment goals- retirement, education, travel-taking different risks for different goals. Discover how stocks may be mispriced, but the index hard to beat. Learn how to create a portfolio that meets your goals." - Terrance Odean, Rudd Family Foundation Professor of Finance, Haas School of Business, University of California, Berkeley

"Insights into goals-based wealth management are some of the many insights in Meir Statman's superb book. Normal investors want financial benefits from their investment but they also want expressive and emotional benefits on the way to their life goals. This book should be on the must-read list of investors and financial advisors alike." - Jean Brunel, editor of the Journal of Wealth Management and author of Goals-Based Wealth Management

"Finance for Normal People is a tour de force. Literally covering the field of Behavioral Finance from A to Z, this is a user friendly book that should be read and on the shelf of every serious financial advisor/manager and all serious investors." - Harold Evensky, Chairman at Evensky & Katz and Professor of Practice, Department of Personal Financial Planning, Texas Tech University

"For investment professionals and their clients, this book can provide a significant boost to their understanding and decision making in managing real-world portfolios." --Financial Analysts Journal

"It is a readable book of applicable findings from behavioural finance particularly for thosewho take long-term investing seriously." -- Financial Times

Table of Contents

    Introduction: What is Behavioral Finance?

    Part 1: Behavioral People are Normal People
    Chapter 1: Normal People
    Chapter 2: Our Wants for Utilitarian, Expressive, and Emotional Benefits
    Chapter 3: Cognitive Shortcuts and Errors
    Chapter 4: Emotional Shortcuts and Errors
    Chapter 5: Correcting Cognitive and Emotional Errors
    Chapter 6: Experienced Happiness, Life-Evaluation, and Choices: Expected Utility Theory and Prospect Theory
    Chapter 7: Behavioral Finance Puzzles: The Dividend Puzzle, the Disposition Puzzle, and the Puzzles of Dollar-Cost-Averaging and Time-Diversification

    Part 2: Behavioral Finance in Portfolios, Life-Cycles, Asset Prices, and Market Efficiency
    Chapter 8: Behavioral Portfolios
    Chapter 9: Behavioral Life-Cycles of Saving and Spending
    Chapter 10: Behavioral Asset Pricing
    Chapter 11: Behavioral Market Efficiency
    Chapter 12: Lessons of Behavioral Finance

Related Titles