Key Points

• Human behavior is subject to pervasive bias that rational observers would consider to be irrational.
• Such irrational behavior is consistent with how investors often approach the financial markets, which over time can degrade investment returns.
• Therefore, it behooves investors to better understand common behavioral biases when making investment decisions.
• As an example, overconfidence can lead investors to overestimate their ability to beat The Street.

Continue reading → Behavioral Finance 101 (Part 1)