Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases (Wiley Finance) | 
 enlarge | Author: Michael M. Pompian
Publisher: Wiley
Category: Book
List Price: $60.00
Buy New: $32.70
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Rating:  12 reviews
Sales Rank: 27720
Media: Hardcover
Pages: 336
Number Of Items: 1
Shipping Weight (lbs): 1.1
Dimensions (in): 9.1 x 6.1 x 1.3
ISBN: 0471745170
Dewey Decimal Number: 332.6019
EAN: 9780471745174
ASIN: 0471745170
Publication Date: April 7, 2006
Availability: Usually ships in 1-2 business days
Shipping: International shipping available
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Product Description
"Pompian is handing you the magic book, the one that reveals your behavioral flaws and shows you how to avoid them. The tricks to success are here. Read and do not stop until you are one of very few magicians."
—Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management Fear and greed drive markets, as well as good and bad investment decision-making. In Behavioral Finance and Wealth Management, financial expert Michael Pompian shows you, whether you're an investor or a financial advisor, how to make better investment decisions by employing behavioral finance research. Pompian takes a practical approach to the science of behavioral finance and puts it to use in the real world. He reveals 20 of the most prominent individual investor biases and helps you properly modify your asset allocation decisions based on the latest research on behavioral anomalies of individual investors.
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| Customer Reviews: Read 7 more reviews...
 Pretty good, but some mistakes. December 15, 2008
owl (Boulder, CO USA)
2 out of 2 found this review helpful
This book has some good practical advice. Much of it was not very useful to me, either because (a) it was already obvious to me, or (b) it was directed at financial advisers, and I am an individual investor, not an adviser. However, I'm sure that there are many people for whom almost all the advice would be useful and needed.
The book contains minor mistakes here and there (mostly copyediting), and one major mistake: The author thinks that risk aversion is a fallacy or some form of irrationality. (This is clear in his remarks on pp. 214, 252.) In this, Pompian is implicitly rejecting a universally accepted principle of economics: the Law of Diminishing Marginal Utility (roughly, that the value of an additional dollar diminishes as your total wealth increases).
This is important, because this Law is the central reason, e.g., why it often makes sense to purchase insurance, why it makes sense to hedge bets, and why investors need to balance risk against potential reward. Failure to understand this could be a pretty serious problem for an investment adviser.
Excellent ideas to try to prevent bad decisions November 24, 2008
Harvey M. Schroeder (Vernon, CT United States)
Especially in these crazy financial times, this is a good book to do some self-analysis through little quizzes and learn how emotions can take over from making good, rational financial decisions. While somewhat geared for financial advisors, it definitely is readable for the intelligent investor who can take the time to read and apply the lessons learned from this book.
One of the best books about investing ever!!! (Michal Stupavsky, Czech Republic) July 16, 2008
Michal Stupavsky
3 out of 3 found this review helpful
I am a graduate student of finance and I am now writing my degree thesis about implications of behavioral finance for individual investors. Pompian's book is a great inspiration for me. It is just a guide how to use results of behavioral finance research to be a better investor.
What I mostly appreciate is a very deep description of 20 behavioral biases. Each of these chapter starts with General Description of the bias, Technical Description. Then there is a Practical Application, Implications for Investors, Research Review, Diagnostic Testing and a Final Advice. I have alredy read Shefrin's Beyon Greed and Fear and I must say that this book was kind of research review and survey. Pompian's book is very practical. Novice investors and also professional traders and portfolio managers will greatly appreciate this book.
There are really a great bunch of practical advice. Pompian is just a great teacher. Every serious student of finance and every investor must read this book!!!
Superb July 2, 2008
Michael Dilger (New Zealand)
1 out of 1 found this review helpful
I'm hard to please. So when I say this book is superb, that's really saying something. It is a well organized reference of twenty cognitive and emotional biases, and I refer to it frequently. Yet it's engaging enough to read cover to cover. You will probably recognize yourself being described a bit more often than you might expect. But with an open mind you will learn how to mitigate the tempting errors of thought that have in the past steered you wrong. And most fun of all, you can use your new knowledge of these biases to take advantage in the marketplace, and all the way to the bank. Game on.
Behavioral finance and cognitive bias December 30, 2007
Frank S. Fang (Chicago)
4 out of 5 found this review helpful
This book covers most of the important cognitive biases that affect investment decision. It makes a great read. The only thing that can be improved is on the aspect of "objective truth". When talking about bias, the author has to assume there is an objective truth out there that is ex ante and easily oberservable to everyone. While this may make it handy for his discussion, it could be misleading if one digs deeper into the market nature of uncertainty.
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