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Best Behavioral Finance Books — So what would be your alternatives to educate yourself in behavioral finance? There are not many. Of course, you can go for costly seminars. But that won’t always be feasible as seminars on behavioral finance don’t happen regularly and even if you would find one or two, they would be so expensive that you would definitely look for something cost effective. And the most cost effective way to educate yourself is to read bunch of books that will give you the best information and help you apply the best psychology in yours or your clients’ financing decisions.

Today, we are going to present to you the best 10 books on behavioral finance so that you don’t need to spend hours and hours at stores to find out the best ones. You just pick these books and read. And all the results you want would be yours.

1. BEHAVIORAL FINANCE AND WEALTH MANAGEMENT

How to Build Optimal Portfolios That Account for Investor Biases (Wiley Finance)

by Michael M. Pompian

Biases are really your enemy. You don’t want your limited beliefs to act as a hindrance to the right choice you could have made. If so, have a look at the review and the best takeaways.

BOOK REVIEW

If you would like to pinpoint your biases and want researches to support the statements, this is the right book for you. You would get a lot of information about investment biases and as you become more aware of them; it would be easier for you to get rid of them. This book is applicable not only for you; rather it would help you with your clients to identify and correct the flaws of your clients so that you can add tremendous value to them and to their investment decisions.

BEST TAKEAWAY FROM THIS BOOK

  • The best part of the book is it is very relevant and professionals (who help investors) and people who invest for themselves. It points out all the biases and helps you overcome them.
  • It’s very short, lucid at the same time comprehensive to understand and take action on.

2. BEHAVIORAL FINANCE: PSYCHOLOGY, DECISION-MAKING, AND MARKETS

by Lucy Ackert & Richard Deaves

This best behavioral finance book will illustrate three separate things to you in a weaving form — psychology of investors, how their psychology affects their decision making and at the same time how the market gets affected.

BOOK REVIEW

This behavioural finance book is a great resource for anyone who likes to invest or helps in investing. The reason is this book is a result of a lot of market research and surveys of how things work for retail investors, professional managers, traders, analysts etc. And whatever the authors collected, they presented all the materials in the most structured manner for consumption of the investors who would like to improve their investment decisions and as a result ensure maximum wealth.

BEST TAKEAWAY FROM THIS BOOK

  • If you need proof of “why” to illustrate what psychology is responsible for the erratic behaviors of investors, you will find all the answers in this book. They are not made up or not the figment of author’s imagination. They are practical and collected.
  • The materials are structured so very well that you would really be able to use it as a reference book for your class (if you are a student) or for helping any clients grow wealth.

3. BEHAVIORAL FINANCE

This is a big picture book on much broader aspects of the spectrum. It will talk about the social, economic and cognitive issues responsible for the psychology of finance.

BOOK REVIEW

Review: This top behavioral finance book is a great book if you talk about value. But it’s a bit overpriced in terms of only 200 pages length. However, this book does justice to whatever it has mentioned to deliver. If we divide the book in useful sections, it would be this — 90 pages on psychology of finance; and 130 pages on finance & empirical tests done on “value” and “reversal effects”. This book is presented in easy to understand manner especially for students who are getting bored with classes on behavioral finance.

BEST TAKEAWAY FROM THIS BOOK

  • You would find a lot of information on efficient market hypothesis (EMH) and how it evolved and it also covers anomalies and serial correlation.
  • This can be called an advanced book on behavioral finance without the vanity of language.

4. BEHAVIORAL FINANCE AND INVESTOR TYPES

Managing Behavior to Make Better Investment Decisions (Wiley Finance)

by Michael Pompian

Managing Behavior to Make Better Investment Decisions (Wiley Finance)

Here the author goes beyond usual clichés of behavioral finance and looks at it from a completely different perspective.

BOOK REVIEW

Once you pick up this behavioral finance book, you would learn about four types of investors and how they make decisions. First type of investors is preservers who preserve wealth rather than taking risks to enhance their wealth. Second kind of investors is followers who take other people’s help to make important investment decisions. Third sort of investors is individualists who are always involved in the financial market and have unconventional way of looking at investments. And the last type of investors are those who are called accumulators and who love to accumulate wealth and confident that they would become successful investors in near future.

BEST TAKEAWAY FROM THIS BOOK

  • This behavioural finance book has distilled everything into four types so that the investors can recognize themselves and act accordingly.
  • This book also cites years of academic researches which would help the average investors make significant decisions about their investments.

5. BEYOND GREED AND FEAR

Understanding Behavioral Finance and the Psychology of Investing (Financial Management Association Survey and Synthesis)

by Hersh Shefrin

Mistakes push us to fear and more mistakes we make, instead of learning from them, we get into more and more fear. As a result when some lucrative opportunities come up, we jump in to get in and greed enters our life. But what if you can go beyond fear and greed! This book will show you how.

BOOK REVIEW

If you read this behavioural finance book, you would feel entertained and at the same time you would learn the nitty-gritty of behavioral finance. According to the book, investors learn slowly and make mistakes along the way. This book will help you curb those mistakes and find out a solution for yourself and for your clients. But in few places, the author is contradictory and sometimes, there are just too many words. Overall, a good read for people who are indirectly related to trading (meaning this book is not for a full time trader, but is useful to investors).

BEST TAKEAWAY FROM THIS BOOK

  • Three concepts are explained in a great way. They are heuristic biases, inefficiency of market and frame dependence.
  • The author goes in great detail about human behaviors and does justice to his explanations.

6. INEFFICIENT MARKETS

An Introduction to Behavioural Finance (Clarendon Lectures in Economics)

by Andrei Shleifer

It is original. It is different. And it makes you think about behavioral finance in a new way.

BOOK REVIEW

Review: This top book on behavioural finance is the most suitable for those who are tired of reading old, rugged stuffs on behavioral finance. This book presents a great way to look at behavioral finance. The author has put a lot of thinking into this book before writing and the writing reflects that. First the author describes the foundation of Efficient Market Hypothesis (EMH) and then presents his thinking.

BEST TAKEAWAY FROM THIS BOOK

  • This book is value for money. If you want to understand the exact psychology behind behavioral finance, this book is for you.
  • This is the best introductory book you would ever find on behavioral finance.

7. PERSONAL BENCHMARK

Integrating Behavioral Finance and Investment Management

by Charles Widger & Daniel Crosby

This book can be concentrated in three two letters, PB (Personal Benchmark), BF Behavioral Finance) & IM (Investment Management) and this books details out these three terms in great detail.

BOOK REVIEW

It is the most personal book on behavioral finance you would ever read. Why? Because in this book the authors took a different approach to explain risk! Risk is very personal thing. And no matter how many statistical models we use to quantify risk, risk would still be very personal. That’s why personal benchmark is important and after reading this book you would be able to integrate three concepts in a single string. That’s why this book is so important to read. Behavioral finance is evolving and only quantifying statements won’t justify its scope and objective.

BEST TAKEAWAY FROM THIS BOOK

  • This best book on behavioral finance doesn’t only contain all the psychological biases; it also talks about all the tangible solutions for these biases. Thus, readers are able to work on their biases.
  • It’s important to know your emotional direction before you get into the field of investing. And this book will show you how to give your mind an emotional direction to think well before you ever get into investment field.

8. HANDBOOK OF BEHAVIORAL FINANCE

by Brian Bruce

This book has been shaped and written so very well. Read the review and the best takeaways to know more.

BOOK REVIEW

As mentioned, this book is really a handbook of behavioral finance. If you are wondering that this book must be highly technical, you are wrong. This book is not technical; rather you can say this book presents simple econometric modeling and also discusses experimental, survey or revealed preference data. Moreover, this book also talks about recent developments in the industry in regards to behavioral finance. Along with that you would also learn to appreciate the recent researches presented within the premises of the book. In simple terms, if you would read this book you would sharpen your saw of investment; if not, you may miss something great if you want to get into investment world anytime soon.

BEST TAKEAWAY FROM THIS BOOK

  • This book is comprehensive and a perfect book for beginners. If you are just starting out, you can read this book. This book is lucidly written and the chapters are short. At the same time each chapter is weaved in a coherent manner soas to provide the maximum benefit to the readers.
  • If you are student of finance, this is an un-put-down-able book.

9. ADVANCES IN BEHAVIORAL FINANCE (ROUNDTABLE SERIES IN BEHAVIORAL ECONOMICS)

by Richard H. Thaler

Leave the trail behind and if you feel that you know enough of behavioral finance, welcome to the advanced world.

BOOK REVIEW

This book is a nice collection of articles designed to wow its readers. But you need to keep in mind that if you are an average investor, you may not be able to appreciate the value it provides. You need to do your homework before diving into this book. There are loads of statistics and academic language is used prudently throughout this book. So if you are thinking of reading this book from which you would get multiple perspectives on behavioral finance, you at least need to know the fundamentals of behavioral finance at the first place.

BEST TAKEAWAY FROM THIS BOOK

  • If you are student of finance, you would be able to appreciate this nice collection.
  • This collection maybe an old one, but it can easily be called a bible for any research scholar who is interested in behavioral finance.

10. ADVANCES IN BEHAVIORAL FINANCE, VOLUME II

(The Roundtable Series in Behavioral Economics)

by Richard H. Thaler

There was a need for volume two as the first volume was too old. So the editor needed to add the recent developments in this volume.

BOOK REVIEW

Review: This book is updated from the previous volume and there are loads of things to learn in this recent volume. People who complained about the sanity of an old paperback would find great value in this book as every recent development are given in this section. However, as it was published in 2005, it still would be considered old if we compare from the perspective of present time. This book is recommended for those interested in pursuing higher studies in behavioral finance.

BEST TAKEAWAY FROM THIS BOOK

  • This is very much updated and very much comprehensive, 744 pages long.
  • This book presents twenty recent papers so that you can understand how behavioral finance has evolved over the years. It is not recommended for beginners; but if you want to pursue behavioral finance, this would be an invaluable resource.



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