Risk Profiling Through A Behavioral Finance Lens

Author : Michael Pompian
Publisher : CFA Institute Research Foundation
Page : 22 pages
File Size : 46,6 Mb
Release : 2016-03-03
Category : Business & Economics
ISBN : 9781934667828

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Risk Profiling through a Behavioral Finance Lens by Michael Pompian Pdf

This piece examines risk profiling through a behavioral finance lens. Behavioral finance attempts to understand and explain actual investor behavior, in contrast to theorizing about investor behavior. It differs from traditional (or standard) finance, which is based on assumptions of how investors and markets should behave. Much has been written about the tension that exists between the willingness to take risk and the ability to take risk. Risk appetite is the willingness to take risk and risk capacity is the ability to take risk. In the behavioral context, risk appetite and risk capacity are defined in terms of known risks and unknown risks. Irrational client behavior often occurs when a client experiences unknown risks. To aid in the advisory process, advisors can use Behavioral Investor Types to help make rapid yet insightful assessments of what type of investor they are dealing with before recommending an investment plan. With a better understanding of behavioral finance vis-à-vis risk taking, practitioners can enhance their understanding of client preferences and better inform their recommendations of investment strategies and products.

Author : Joachim Klement
Publisher : CFA Institute Research Foundation
Page : 154 pages
File Size : 50,9 Mb
Release : 2018-05-01
Category : Business & Economics
ISBN : 9781944960476

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Risk Profiling and Tolerance: Insights for the Private Wealth Manager by Joachim Klement Pdf

If risk aversion and willingness to take on risk are driven by emotions and we as humans are bad at correctly identifying them, the finance profession has a serious challenge at hand—how to reliably identify the individual risk profile of a retail investor or high-net-worth individual. In this series of CFA Institute Research Foundation briefs, we have asked academics and practitioners to summarize the current state of knowledge about risk profiling in different key areas.

Author : Greg B. Davies
Publisher : CFA Institute Research Foundation
Page : 230 pages
File Size : 40,7 Mb
Release : 2017-08-01
Category : Business & Economics
ISBN : 9781944960247

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New Vistas in Risk Profiling by Greg B. Davies Pdf

Risk profiling is fraught with misunderstandings that lead to ill-advised approaches to determining suitable investment solutions for individuals. The author discusses how we should think about the crucial elements of (a) risk tolerance, (b) behavioural risk attitudes, and (c) risk capacity. He uses a simple thought experiment to examine a stripped-down investor situation and define the essential features and exact role of each of the components of an investor's overall risk profile. He examines options for eliciting and measuring risk tolerance and considers some promising avenues for future methods.

Author : Joachim Klement
Publisher : CFA Institute Research Foundation
Page : 28 pages
File Size : 55,8 Mb
Release : 2015-02-26
Category : Business & Economics
ISBN : 9781934667941

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Investor Risk Profiling: An Overview by Joachim Klement Pdf

The current standard process of risk profiling through questionnaires is highly unreliable and typically explains less than 15% of the variation in risky assets between investors—mostly because the questionnaires focus on socio-economic variables and hypothetical scenarios. The existing research in risk profiling shows, however, that several factors can provide more accurate and reliable insights into the risk profile of investors. Among these factors are the lifetime experiences an investor has had, the financial decisions made in the past, and the influence of family and friends as well as advisers. By using these factors, practitioners can get a better understanding of their clients’ preferences in order to recommend suitable investment strategies and products.

Author : Kremena K. Bachmann,Enrico G. De Giorgi,Thorsten Hens
Publisher : John Wiley & Sons
Page : 263 pages
File Size : 43,9 Mb
Release : 2018-06-06
Category : Business & Economics
ISBN : 9781119453703

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Behavioral Finance for Private Banking by Kremena K. Bachmann,Enrico G. De Giorgi,Thorsten Hens Pdf

An essential framework for wealth management using behavioral finance Behavioral Finance for Private Banking provides a complete framework for wealth management tailored to the unique needs of each client. Merging behavioral finance with private banking, this framework helps you gain a greater understanding of your client’s wants, needs, and perspectives to streamline the decision making process. Beginning with the theoretical foundations of investment decision making and behavioral biases, the discussion delves into cultural differences in global business and asset allocation over the life cycle of the investment to help you construct a wealth management strategy catered to each individual’s needs. This new second edition has been updated to include coverage of fintech and neurofinance, an extension of behavioral finance that is beginning to gain traction in the private banking space. Working closely with clients entails deep interpersonal give and take. To be successful, private banking professionals must be as well-versed in behavioral psychology as they are in finance; this intersection is the heart of behavioral finance, and this book provides essential knowledge that can help you better serve your clients’ needs. Understand the internal dialogue at work when investment decisions are made Overcome the most common behavioral biases—and watch for your own Learn how fintech and neurofinance impact all aspects of private banking Set up a structured wealth management process that places the client’s needs front and center Private banking clients demand more than just financial expertise. They want an advisor who truly understands their needs, and can develop and execute the kind of strategy that will help them achieve their goals. Behavioral Finance for Private Banking provides a complete framework alongside insightful discussion to help you become the solution your clients seek.

Author : Thorsten Hens,Kremena Bachmann
Publisher : John Wiley & Sons
Page : 270 pages
File Size : 55,5 Mb
Release : 2011-07-05
Category : Business & Economics
ISBN : 9780470742075

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Behavioural Finance for Private Banking by Thorsten Hens,Kremena Bachmann Pdf

A complete framework for applications of behavioral finance in private banking, Behavioural Finance for Private Banking considers client needs specific to private banking like personal circumstances, objectives, and attitude to risk. This book includes the theoretical foundations of investment decision-making, an introduction to behavioral biases, an explanation of cultural differences in global business, a guide to asset allocation over the life cycle of the investment, and several case studies to illustrate how can be applied. A must-read for anyone in private banking, this book demonstrates how to satisfy client needs.

Author : CFA Institute Research Foundation
Publisher : CFA Institute Research Foundation
Page : 92 pages
File Size : 40,9 Mb
Release : 2019-04-19
Category : Business & Economics
ISBN : 9781944960728

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Research Foundation Review 2018 by CFA Institute Research Foundation Pdf

The Research Foundation Review 2018 summarizes the offerings from the CFA Institute Research Foundation over the past year—books, literature reviews, workshop presentations, and other relevant material.

Author : H. Kent Baker,Greg Filbeck,Victor Ricciardi
Publisher : Oxford University Press
Page : 608 pages
File Size : 48,9 Mb
Release : 2017-05-02
Category : Business & Economics
ISBN : 9780190270018

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Financial Behavior by H. Kent Baker,Greg Filbeck,Victor Ricciardi Pdf

Financial Behavior: Players, Services, Products, and Markets provides a synthesis of the theoretical and empirical literature on the financial behavior of major stakeholders, financial services, investment products, and financial markets. The book offers a different way of looking at financial and emotional well-being and processing beliefs, emotions, and behaviors related to money. The book provides important insights about cognitive and emotional biases that influence various financial decision-makers, services, products, and markets. With diverse concepts and topics, the book brings together noted scholars and practitioners so readers can gain an in-depth understanding about this topic from experts from around the world. In today's financial setting, the discipline of behavioral finance is an ever-changing area that continues to evolve at a rapid pace. This book takes readers through the core topics and issues as well as the latest trends, cutting-edge research developments, and real-world situations. Additionally, discussion of research on various cognitive and emotional issues is covered throughout the book. Thus, this volume covers a breadth of content from theoretical to practical, while attempting to offer a useful balance of detailed and user-friendly coverage. Those interested in a broad survey will benefit as will those searching for more in-depth presentations of specific areas within this field of study. As the seventh book in the Financial Markets and Investment Series, Financial Behavior: Players, Services, Products, and Markets offers a fresh looks at the fascinating area of financial behavior.

Author : Michael E. Drew,Adam N. Walk
Publisher : CFA Institute Research Foundation
Page : 190 pages
File Size : 42,7 Mb
Release : 2019-04-22
Category : Business & Economics
ISBN : 9781944960704

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Investment Governance for Fiduciaries by Michael E. Drew,Adam N. Walk Pdf

Governance is a word that is increasingly heard and read in modern times, be it corporate governance, global governance, or investment governance. Investment governance, the central concern of this modest volume, refers to the effective employment of resources—people, policies, processes, and systems—by an individual or governing body (the fiduciary or agent) seeking to fulfil their fiduciary duty to a principal (or beneficiary) in addressing an underlying investment challenge. Effective investment governance is an enabler of good stewardship, and for this reason it should, in our view, be of interest to all fiduciaries, no matter the size of the pool of assets or the nature of the beneficiaries. To emphasize the importance of effective investment governance and to demonstrate its flexibility across organization type, we consider our investment governance process within three contexts: defined contribution (DC) plans, defined benefit (DB) plans, and endowments and foundations (E&Fs). Since the financial crisis of 2007–2008, the financial sector’s place in the economy and its methods and ethics have (rightly, in many cases) been under scrutiny. Coupled with this theme, the task of investment governance is of increasing importance due to the sheer weight of money, the retirement savings gap, demographic trends, regulation and activism, and rising standards of behavior based on higher expectations from those fiduciaries serve. These trends are at the same time related and self-reinforcing. Having explored the why of investment governance, we dedicate the remainder of the book to the question of how to bring it to bear as an essential component of good fiduciary practice. At this point, the reader might expect investment professionals to launch into a discussion about an investment process focused on the best way to capture returns. We resist this temptation. Instead, we contend that achieving outcomes on behalf of beneficiaries is as much about managing risks as it is about capturing returns—and we mean “risks” broadly construed, not just fluctuations in asset values.

Author : Venezia Itzhak
Publisher : World Scientific
Page : 500 pages
File Size : 45,8 Mb
Release : 2019-04-18
Category : Business & Economics
ISBN : 9789813279476

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Behavioral Finance: The Coming Of Age by Venezia Itzhak Pdf

The area of behavioral finance, though relatively young, has matured and spread beyond its initial objectives: to demonstrate the fallibility of the efficient market hypothesis, to shake the belief in the ubiquity of rational decision making, and to convince the finance world of the importance of psychological biases in decision making. The success of the field in meeting its goals, however, has called into question its continued relevance. Behavioral finance is thus currently at a crossroads, and researchers need to decide which way they should turn for the area to continue to thrive and to meaningfully contribute to financial knowledge.This collection of papers deals with rarely-explored topics to point at new directions that behavioral finance should explore to maintain its viability, along with contributions to traditional topics. Some of these topics include innovations, the psychology of policy-makers, biases of peer-to-peer market participants, the behavior and motivation behind corporate social responsibility, and the design of exchanges. Additionally, well-known topics such as the disposition effect, slow and fast decisions and the availability heuristic are revisited, and surprising new findings are presented.By opening the field to novel avenues of discussion, this book addresses the future of behavioral finance and its transition into a new era.

Author : H. Kent Baker,Greg Filbeck,John R. Nofsinger
Publisher : Oxford University Press
Page : 256 pages
File Size : 52,5 Mb
Release : 2019-02-01
Category : Business & Economics
ISBN : 9780190868758

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Behavioral Finance by H. Kent Baker,Greg Filbeck,John R. Nofsinger Pdf

People tend to be penny wise and pound foolish and cry over spilt milk, even though we are taught to do neither. Focusing on the present at the expense of the future and basing decisions on lost value are two mistakes common to decision-making that are particularly costly in the world of finance. Behavioral Finance: What Everyone Needs to KnowR provides an overview of common shortcuts and mistakes people make in managing their finances. It covers the common cognitive biases or errors that occur when people are collecting, processing, and interpreting information. These include emotional biases and the influence of social factors, from culture to the behavior of one's peers. These effects vary during one's life, reflecting differences in due to age, experience, and gender. Among the questions to be addressed are: How did the financial crisis of 2007-2008 spur understanding human behavior? What are market anomalies and how do they relate to behavioral biases? What role does overconfidence play in financial decision- making? And how does getting older affect risk tolerance?

Author : H. Kent Baker,Victor Ricciardi
Publisher : John Wiley & Sons
Page : 645 pages
File Size : 49,6 Mb
Release : 2014-02-10
Category : Business & Economics
ISBN : 9781118492987

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Investor Behavior by H. Kent Baker,Victor Ricciardi Pdf

WINNER, Business: Personal Finance/Investing, 2015 USA Best Book Awards FINALIST, Business: Reference, 2015 USA Best Book Awards Investor Behavior provides readers with a comprehensive understanding and the latest research in the area of behavioral finance and investor decision making. Blending contributions from noted academics and experienced practitioners, this 30-chapter book will provide investment professionals with insights on how to understand and manage client behavior; a framework for interpreting financial market activity; and an in-depth understanding of this important new field of investment research. The book should also be of interest to academics, investors, and students. The book will cover the major principles of investor psychology, including heuristics, bounded rationality, regret theory, mental accounting, framing, prospect theory, and loss aversion. Specific sections of the book will delve into the role of personality traits, financial therapy, retirement planning, financial coaching, and emotions in investment decisions. Other topics covered include risk perception and tolerance, asset allocation decisions under inertia and inattention bias; evidenced based financial planning, motivation and satisfaction, behavioral investment management, and neurofinance. Contributions will delve into the behavioral underpinnings of various trading and investment topics including trader psychology, stock momentum, earnings surprises, and anomalies. The final chapters of the book examine new research on socially responsible investing, mutual funds, and real estate investing from a behavioral perspective. Empirical evidence and current literature about each type of investment issue are featured. Cited research studies are presented in a straightforward manner focusing on the comprehension of study findings, rather than on the details of mathematical frameworks.

Author : Bill Martin CFA
Publisher : Harriman House Limited
Page : 254 pages
File Size : 45,8 Mb
Release : 2017-10-25
Category : Business & Economics
ISBN : 9780857195845

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The Smart Financial Advisor by Bill Martin CFA Pdf

Author : Anonim
Publisher : CFA Institute Research Foundation
Page : 70 pages
File Size : 51,7 Mb
Release : 2017
Category : Business & Economics
ISBN : 9781944960223

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Research Foundation Review 2016 by Anonim Pdf

The Research Foundation Review 2016 summarizes the offerings from the CFA Institute Research Foundation over the past year—monographs, literature reviews, workshop presentations, and other relevant material.

Author : Prince Sarpong
Publisher : Centre for financial Planning Studies
Page : 319 pages
File Size : 40,9 Mb
Release : 2024-01-22
Category : Business & Economics
ISBN : 9798877002630

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Portfolio Management for Financial Advisors by Prince Sarpong Pdf

Volume 2 of Portfolio Management for Financial Advisors is a visionary exploration into the evolving landscape of managing client portfolios in financial planning. Being more than a sequel, this book challenges the financial planning profession to aspire for profound impact. Beyond foundational concepts, the author blends professional experience with academic rigour to provide a unique lens on managing client portfolios. Among other topics, the book delves into practical tools for portfolio risk management, retirement portfolio management, and boldly asserts the profession's potential to address global challenges.