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Behavioural Investing: A Practitioners Guide to Applying Behavioural Finance (The Wiley Finance Series) Hardcover – 21 Sep 2007


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Product details

  • Hardcover: 728 pages
  • Publisher: John Wiley & Sons; 1 edition (21 Sept. 2007)
  • Language: English
  • ISBN-10: 0470516704
  • ISBN-13: 978-0470516706
  • Product Dimensions: 17.8 x 4.8 x 25.1 cm
  • Average Customer Review: 4.8 out of 5 stars  See all reviews (4 customer reviews)
  • Amazon Bestsellers Rank: 239,334 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Review

"It is quite simply the best and most comprehensive treatment of the subject to date."  ( Financial Times , Monday 3rd December 2007) "The Year′s most exhaustive, and often entertaining, coverage of the behavioural literature."  ( Financial Times , Saturday 15th December 2007) "...one of the few ′must read′ books on the topic of investing."  ( The Herald – Glasgow , Saturday 2nd February 2008) "…a fantastic insight into how markets operate… [and] one of the few "must read" on the topic of investing." ( The Herald , Sat 2nd February 2008)

From the Back Cover

Behavioural investing seeks to bridge the gap between psychology and investing. All too many investors are unaware of the mental pitfalls that await them. Even once we are aware of our biases, we must recognise that knowledge does not equal behaviour. The solution lies is designing and adopting an investment process that is at least partially robust to behavioural decision–making errors. Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance explores the biases we face, the way in which they show up in the investment process, and urges readers to adopt an empirically based sceptical approach to investing. This book is unique in combining insights from the field of applied psychology with a through understanding of the investment problem. The content is practitioner focused throughout and will be essential reading for any investment professional looking to improve their investing behaviour to maximise returns. Key features include: The only book to cover the applications of behavioural finance. An executive summary for every chapter with key points highlighted at the chapter start. Information on the key behavioural biases of professional investors, including The seven sins of fund management, Investment myth busting, and The Tao of investing. Practical examples showing how using a psychologically inspired model can improve on standard, common practice valuation tools. Written by an internationally renowned expert in the field of behavioural finance.

Inside This Book (Learn More)
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Front Cover | Copyright | Table of Contents | Excerpt | Index
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Customer Reviews

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Most Helpful Customer Reviews

4 of 4 people found the following review helpful By K. Moss on 4 Feb. 2011
Format: Hardcover Verified Purchase
I bought this somewhat daunting tome, rather than the smaller, and considerable cheaper "The Little Book of Behavioural Investing" (The Little Book of Behavioral Investing: How not to be your own worst enemy (Little Book, Big Profits) by the same author.

After wrestling somewhat with the compendious content of this rather meaty work, I was glad I had made the decision that I did. Montier's book is nothing if not comprehensive in its scope, and there's an abundance of research and other market data underpinning his conclusions about the impact of investor behaviour on the 'results'. Indeed, as an IFA/Financial Planner viewing the subject, the obvious strengths of the author's arguments had a lot to say about the way in which I had (in the past) carried out the whole business of providing investment advice.

It is unlikely that many individual investors would purchase this book - but having absorbed the content, it would seem appropriate for any investment professional to get a thorough grasp of the subject. I found the chapter entitled 'Part Man, Part Monkey', which deals with the commonest biases exhibited by investors to be enormously helpful. Furthermore, his critique of 'The Seven sins of Fund Management' was, I felt, bang on - and probably blows out of the water some 90% of what purports to be 'investment advice'.

If IFAs or financial planners are concerned about the dependability of what they deliver to their clients, in terms of their investment advice proposition, I would hope that this volume would be an extremely valuable resource. Certainly, within my own business (2020fs.co.uk), we have worked hard to learn these lessons when it comes to delivering value-added services to clients.
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7 of 8 people found the following review helpful By Ravi on 2 Oct. 2009
Format: Hardcover
"Behavioral Investing" is a textbook that is also an excellent 'general read' on the subject. While the depth of coverage is possibly not appropriate for it to be considered as suitable for academic (research) work, it is suitable for an overall understanding of the subject. The book has a lucid, easy-to-follow coverage of the subject, with excellent examples on how human psychology and behavioral quirks influence our ability to take financial decisions. Indeed, the psychological insights appear to go beyond just 'financial' aspects, into general decision-making.
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Format: Kindle Edition Verified Purchase
Behavioural investing is a fascinating subject and James Montier points out how we are all susceptible to behaivoural issues, indeed we are hird wired for to do so. But by being aware and following many of James' rules we can avoid the common pitfalls and benefit from otheres inability to do so.
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1 of 6 people found the following review helpful By S. HART on 20 Jan. 2010
Format: Hardcover
An amazingly well written book which both challenges the mind and is full of invaluable insights into stock trading. Some of the terms I have looked up on the internet as I was not sure of what CAPM was as the book does make assumptions as to some degree of knowledge. Having checked out the definitions of some terms I found the arguments within the material to fit around the terms which added further value to the lessons within. So far I have read around 2/3 of the book and am already developing my own stock screening process based upon the learning I have gained and am looking forward to learning more in the final third. An excellent read.
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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 13 reviews
49 of 51 people found the following review helpful
Intriguing and entertaining 30 Dec. 2007
By Olivier Clementin - Published on Amazon.com
Format: Hardcover
This book is a collection of short notes about psychology, investment strategy and finance. Some chapters are original, but most of them were written as Equity Strategy weeklies for clients of James Montier's then employer (Dresdner Kleinwort Benson). I had already read a few of them, including the famous one about happiness and money, which everyone in the market has read, and which I preciously retain for consultation on the gloomy days when my portfolio loses more than 1%. The notes are unedited and presented thematically, not chronologically, which is sometimes confusing. There is some repetition between chapters, and several chapters assume prior knowledge not exposed in the book, which makes the discourse not very user friendly at times. You need to have some experience of investment to benefit fully from it.

Overall the book is well written: clear, clever, entertaining and unpretentious, as is appropriate from a broker writing to clients - unlike, for instance, the unsufferably arrogant tone of Nassim Taleb, who writes on similar subjects and who, incidentally, is favorably mentioned in this book. Both Montier and Taleb define themselves as skeptical empiricists (or was that empirical skeptics ?) It reads rather quickly despite the number of pages: each chapter is preceded by a caption and a summary, which means that everything is repeated three times, and charts and graphs take up a lot of space. The book covers a lot of ground in psychology, investment process, investment strategy and ethics, including commentary on the latest research in those fields and extensive quotations from the 30s, notably from "the Masters" Keynes and Ben Graham. However, it is not really "a practitioner's guide to applying behavioural finance" since Montier's (sound) investment advice is not really based on psychology. The last parts, on ethics and happiness, are particularly original in an investment context. A higly recommended alternative to Taleb's forgettable Black Swan.
27 of 31 people found the following review helpful
A collection of newsletters 18 Nov. 2008
By Jackal - Published on Amazon.com
Format: Hardcover
This is a collection of the author's newsletters to institutional clients. I'm sure they are quite interesting to read if you get them in real-time, but here you have the best of them collected in a thick volume.

This format is not ideal. The notes contain useful information and ideas but are very disconnected. The author actually states that one can just open the book anywhere and read one note. This is true, but then I would argue for reading good blogs instead. They are in real-time and all the links are fresh.

Having said this the notes contain some useful ideas so I've still given the book three stars.

UPDATE 2012. I got more interesting in a deeper understanding of the equity market so I have read and thought more about the topic. I don't think most people would find this book useful because it is too dense and disordered. However, if you are really serious about understanding the market this is a good start. However, you must prepare yourself to read some of the academic research too. So the book might refer to some very interesting research done 2004. To find out what has happened since you need to access the financial research (like Journal of Finance, Journal of Financial Economics, Financial Analysts Journal). If you do not have access (and skill to read) these publications, the book is going to be very confusing. As I pointed out in my initial review, the ordering of the material in the book is not really great. You need to do the extra work. But for all the work done by the author, I am raising my rating to four stars. Another similar book with a huge amount of work going into it is Expected Returns: An Investor's Guide to Harvesting Market Rewards (The Wiley Finance Series).
11 of 11 people found the following review helpful
Mixed feelings 3 May 2011
By Dimitri Shvorob - Published on Amazon.com
Format: Hardcover
Discussing a book about investor biases, I will admit a few *reader* biases - directed against authors who

(a) produce a book by pasting together previously published articles, and invest no effort into editing the material to reduce duplication or just weed out the typos. Here, editorial work has consisted of writing a short preface and collating the original bibliographies.

(b) go with a sexy title that happens to oversell the book's contents. I would make a guess of 200-250 pages that can be linked to "behavioral investing" - and most of those is surveying psychology research. It is interesting to hear the author's thoughts on investing - forecasting is out; Graham-Dodd and trailing multiples are in - but this is not what I paid for.

(c) do not always seem to know what they are talking about*. The FT review may call this book "the best and most comprehensive treatment of the subject to date" - better luck next time, Richard Thaler's "Advances in behavioral finance" and Hersh Shefrin's "Behavioral corporate finance" - but a look at those should tell you the qualitative difference.

I would advise readers interested in "behavioral" stuff to consult Thaler's and Shefrin's books - and to read "Behavioral investing" as a very entertaining introduction to the subject and a collection of fairly interesting investment-research essays.

* Type "Bayesian" into "Search inside" to navigate to page 116, and try to understand (and if you do, please explain to me) the author's concept of prior and posterior probabilities. If you prefer math, try keyword "acquirer" to get to page 65, read the exhibit and help me see why "by offering $60, Company T is assumed on average to be worth $30". Or, search for "Linda" to get to page 27, read the first three paragraphs of the new section and see if you understand the author's explanation about "people underweighting", etc. Linda comes back on page 84, and take 2 does better, but it's still not good. (By the way, Linda is only seen twice - but a piece of research by Bechara et al. comes back as often as Freddy Krueger).
15 of 16 people found the following review helpful
One of the solid, no nonsense investment books 24 July 2008
By Cem Kurdoglu - Published on Amazon.com
Format: Hardcover
Mostly a compilation of the writer's research papers, written for an investment bank. Well, that's ok, but most of them are not edited for the book, just inserted into the book as they are. This brings a lot of repetitions and some references to papers, that you don't have access to. At least those papers could have been inserted as well. But we have to give the full credit to the writer even as this book as it is, it is a book of comprehensive research and full of insight regarding the psychology of the investing public. It also gives the reader a glimpse of all previous investment research. One of the good solid investment books.
3 of 3 people found the following review helpful
valuable insights, in a frustrating format 20 May 2009
By catweazle - Published on Amazon.com
Format: Hardcover Verified Purchase
I think the criticisms found in the previous reviews are valid. The book is indeed just a collection of periodic notes that were sent to clients of J. Montier's employer, Dresdner Kleinwort. And this format is at times frustrating, since occasionally these notes reference previous ones, which the reader of the book has either no access to, or which are included on later pages of the book. At other times, the format leads to redundancies, as the same point will be reiterated in different client notes.

But I could not get myself to take more than one star off, because the insights are so important, and the research presented to bolster them is very compelling. This is true both in terms of the psychological research underpinning the precepts of behavioural investing, and of the empirical research that shows the practical impact on asset prices.

I would add to the criticisms that this book seems comparatively expensive, but I would say that in this case, you get what you pay for.
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