When economics met psychology
Traditionally, economic theory expects “humans” to behave in remarkable ways: overflowing in judgment and self-control, with exceeding expertise in math and never too generous. Not quite how Richard Thaler believes real people behave. A professor of economics and behavioural science at the University of Chicago, Thaler spent 40 years studying human bias and temptation before […]
A History of Herding
Our colleagues at Edgepoint Wealth Management Inc. recently asked us this question: “Ever thought about the similarities between picking winning investments and choosing winners in a beauty contest?” Apparently, British economist, John Maynard Keynes examined just that concept in what could be called a “Keynesian Beauty Contest”. Edgepoint’s article delves much deeper and explains the […]
A Little Nudge in the Right Direction
Richard Thaler’s Nobel Prize-winning nudge theory is making headlines across Canada and around the world, but what is it and what are its practical implications? Thaler’s theory proposes people can be encouraged to do what is best for them and society by making subtle policy shifts that create a default choice without forcing people to […]
Investing Biases
A bias can be described as an inclination that inhibits impartial judgment. Every day we make decisions based on facts and biases, often without even realizing it. Some biases are helpful, while others have potential to be harmful. In the investment realm, behavioral biases are defined as systematic errors in financial judgment or imperfections in […]
