I was reading this article in the NY Times about a wide ranging diet study. They performed a meticulously controlled test to study what type of diet works best. Their [ … ]
Category: Behavioral Finance
How to Overcome Your Fear of Bonds
I specialize in building relatively conservative “all weather” style indexing portfolios. They are designed for people who have a reasonably long time horizon (at least 5-10 years), don’t want to [ … ]
Curating a Social Media Feed to Make Better Decisions
One of the most common problems in economics and finance is the fallacy of composition. The fallacy of composition occurs when you fail to understand the entirety of an argument. [ … ]
Let’s Talk About the Bubble in Catastrophizing
There’s a bubble in catastrophizing. This is the tendency to always assume the worst. Which is weird because the worst rarely plays out. In fact, even in worst case scenarios [ … ]
The Confirmation Bias of the Anti-Forecasters
It’s become fashionable in recent years to shun all types of forecasting about the future. This narrative usually involves the cherry picking of bad forecasts to prove the point. For [ … ]
The Relative Thinking Trap
Humans have an easier time understanding the world by thinking about things in relative terms. These comparisons help us better compartmentalize our thoughts and benchmark our performance. Relative thinking creates order [ … ]
ETFs Don’t Kill Investors, Investors Kill Investors
There was a good piece in the WSJ today discussing potential “flaws” in Exchange Traded Funds (ETFs). ETFs are a relatively new product that have amassed huge quantities of assets [ … ]
Covariation Bias and the Bear Market “Genius”
Covariation bias is the tendency for people to overestimate the relationship between fearful stimuli and negative outcomes. The classic example in scientific studies is people’s reactions to spiders. Death from [ … ]
Valeant and the Gambler’s Dilemma
If you’ve been paying attention to the financial media in the last few weeks you’ve probably seen the drama surrounding a company named Valeant. In case you’ve been buried in [ … ]