9 Psychological Traits that Influence Our Investing and Business Decisions

Posted by ronika under Strategy
From http://www.montrealfinancial.ca 4857 days ago
Made Hot by: Sun Tzu Business Guide on January 31, 2011 2:14 pm

Modern portfolio theory assumes that we are rational investors and invest only in efficient and optimal portfolios that provide the maximum return for minimum risk. The truth (as posited by Behavioural Economists) is that we far from rational and are subject to a myriad of psychological influences and behaviours that prevent us from not only making optimal investment or business decisions, but can in some cases turn us into morons. Some of these behaviours are discussed.

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Comments

Written by ShoshFromJobShuk
4857 days ago

I agree Ronika, this is a very enlightening article about the factors that influence our behaviors and decisions.

Shoshi

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Written by ronika
4856 days ago

Thanks, Shoshi. Appreciate the feedback.

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Written by yoni67
4857 days ago

Ronika,

Fantastic article. Very educational and thought-provoking. I did my undergraduate in Psychology at West Virginia University (WVU), the most behavioral school in the nation. Need proof? B.F Skinner's (militant behavioralist--"Beyond Freedom and Dignity") daughter Julia Vargas was one of my professors. We spent months and months with rats in Skinner boxes and Chinese fighting fish in front of mirrors learning that beings have no thoughts or impulses other than being robot-like reactors to the environment.

Thanks for proving them wrong and showing that there is a lot more thought, weighing and factorial considerations than they expound!

Yoni

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Written by ronika
4856 days ago

Thanks, Yoni. I was actually teaching a class on how these traits affect investing behaviour and thought it would be interesting to write about how it pertains to business decisions.

Wow - your undergrad degree sounds really interesting! Just as your article pointed out (I was truly shocked to find out about Dolph Lundgren's accomplishments) we have to understand how these biases and emotions affect our decisions and try and mitigate their effects.

It's a fascinating field of study and one that people seem to be paying a lot more attention to.

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