Great book! Mickäel has done a great job of explaining the insights from over 50
groundbreaking psychological experiments. You will learn how to avoid many of the
psychological mistakes made by most investors. He teaches you to watch out for
overconfidence and the momentum bias to avoid large losses. He helps you to understand how
your social relationships can change your asset allocation risk profile. Forearmed is
forewarned. If you apply Mickäel’s insights, you will improve your investment
performance.
Paul Stefansson
Executive Director, UBS AG
Why are investors sometimes their own worst enemies? As this eminently readable book
shows, all sorts of biases affect investors’ judgments, ranging from sheer ignorance and
emotions to overconfidence or aversions, from selected short-term memory to undue
generalizations. Building on the expanding literature in behavioral economics, the
experiments reported here shed a useful, often funny, light on the implicit rules
investors use to form their judgment and decisions. This book will definitely help you
make wiser investment decisions!
Christian Koenig
Director, Asian Center, ESSEC Business School
Mickäel Mangot provides a fantastic tool that individuals as well as financial advisors
can immediately apply to their portfolios. This book’s success lies in its superbly
easy-to-use format: Mangot demystifies the technical terminology of behavioral finance by
linking everyday behavior to the world of investing. So while the human examples are
enjoyable and interesting (you’ll chuckle when you recognize these traits in yourself),
he deftly explains how these very human biases lie at the root of 57 simple but very
damaging investment mistakes. Most importantly, each conclusion provides a concise,
sensible summary to help you correct—and improve—your investment decisions.
Philippa Huckle
CEO, The Philippa Huckle Group
This is an insightful book that forces one to question one’s own financial behavior.
50 Psychological Experiments for Investors covers different topics such as savings, equity
investment and property investment. The portrait of the investor presented here is harsh
but can be highly profitable for anyone who recognizes that he or she is vulnerable to
misjudgments and misguided emotions. A must-read for any self-questioning investor.
Jacques-Henri David
Vice Chairman Global Banking, Deutsche Bank
Mickäel Mangot is Adjunct Professor at ESSEC Business School in
Singapore. His works focus on behavioral finance and its applications for individual
investors and professionals.
Mickäel has authored several books on the psychology of investors in financial
markets. In France, his book Pyschologie de l’Investisseur et des Marchés Financiers
was awarded the 2006 Turgot Prize for the best book in financial economics.
He conducts seminars and trainings for major financial companies in Paris, Geneva and
Singapore, targeting private bankers, fund managers and traders. Mickäel also gives
educational conferences to individual investors to help them monitor and improve their
financial behavior. He contributes regularly to economic and financial newspapers
providing insights into the psychology of investors in different market environments.
Mickäel earned his MBA and PhD in Economics from Essec Business School and the
University of Paris Pantheon-La Sorbonne, respectively.
Table of Contents
Foreword
Chapter 1
A love of anecdotes
How we choose information on fallacious criteria
1. Why do you think you have to invest in the stock market when prices have
skyrocketed?
Momentum bias
2. Why do you buy stocks when the market has gone up and bonds when it has gone down?
Momentum management
3. Why are you sure that everyone agrees with your view that the market is going to
go up?
False consensus
4. Why does Google's success make you want to invest in high-tech?
The availability heuristic
5. Why has your stock portfolio only gained 5% this year when you are sure it has
earned twice as much?
The confirmation bias
6. Why is it that on moving to the boonies you rent an overly expensive apartment?
Points of reference
Chapter 2
Hopeless at math!
How silly mathematical errors enter our financial decisions
7. Why do you play black at roulette when red has just come up four times in
a row?
The gambler's fallacy
8. Why do you trust the mutual fund that had the best performance last year?
Belief in the "hot hand"
9. Why do young savers become rich seniors?
The under-estimation of compound interest
10. Why does inflation encourage selling the house and renting instead?
The money illusion
Chapter 3
All the eggs in a broken basket
How our view of risk leads us to poorly diversify investments
11. Why do you refuse to put foreign stocks in your portfolio?
Forgetting correlations
12. Why do young people buy Levi stock and older folk buy Hermes?
The bias of familiarity
13. Why is 90% of your portfolio in French stocks?
National bias
14. Why have you bought stock in that high-flying company in your area?
Local bias
15. Why do you own stocks in the company where you work?
Employer bias
16. Why does the industrial waste collection sector not attract investors?
Emotional reasoning
Chapter 4
For me, it's different!
How optimism and overconfidence encourage taking excessive risk
17. Why do you look more closely at the potential for growth than at the
potential for loss in an investment?
Bias of optimism
18. Why do you think that you know precisely when the stock market will crash?
Overconfidence
19. Why, after a set-back, do you always consider mutual fund managers to be hapless?
Hindsight bias
20. Why do you place more orders when the market is soaring?
The self-attribution bias
21. Why do you take more risk after raking in unexpected gains?
The "house money" effect
22. Why do you place so many orders on the Exchange each year?
Excessive trading
23. Why do you earn less on the market when you place orders on the Internet?
Illusion of control on the Internet
Chapter 5
An obsession:
Never regret anything
How the loss and regret aversions inhibit our behaviour
24. Why do you try to sell your house at an unrealistic price when real
estate goes down?
Loss aversion
25. Why do you keep your losing securities longer than those that are earning?
The deposition effect
26. Why do you sell all your losing stocks on the same day?
Hedonic editing
27. Why do you re-invest in your losing stocks?
The committed expenditure effect
28. Why do you never buy back securities on which you have lost money?
The "snake bite" effect
29. Why do you not like to sell stocks which have just gone down?
Regret aversion
30. Why do you change nothing in the portfolio that your grandmother has left you?
Status quo bias
31. Why do you keep stocks that you would not buy in your portfolio?
The endowment effect
Chapter 6
When Mars and Venus decide to invest
How men and women consider risk and confidence differently in their financial decisions
32. Why does Mars invest more than Venus?
Gender differences and attitude toward risk
33. Why does Mars prefer stocks and Venus bonds?
Gender differences and investment choices
34. Why does Mars change his portfolio more often than Venus?
Gender differences and confidence
35. Why do Venus and Mars draw closer with time?
Gender differences and experience in financial markets
Chapter 7
Investing by the Sun
How climate and the calendar influence our investing mood
36. Why do the markets go up when it is nice out?
The Sun effect
37. Why do you have to look up before buying stocks?
The lunar effect
38. Why do markets decline on Monday?
Blue-Monday
39. Why do you too buy stocks just before Christmas?
The holiday effect
Chapter 8
Inborn or acquired?
How our financial behaviour depends on education and personal characteristics.
40. Why are those that do their Christmas shopping at the last minute poorer
than others?
Individual preferences and investing behaviour
41. Why would it be a good thing if your children were trained in the handling of
their piggy banks?
Financial education at school
42. Why would you gain if you took financial training in your company?
Financial education of adults
Chapter 9
Not sillier than your neighbour
How social relationships affect our financial decisions
43. Why does going to church encourage the buying of shares?
Social interactions
44. Why does your colleague become your top financial advisor in matters of saving
for retirement?
Social norms
45. Why do investment clubs favour consensual investments?
Groupthink
46. Why do investment clubs take more risks than individual investors?
Polarization toward risk
Chapter 10
Packaging counts too
How the presentation of financial products changes our choices
47. Why does the distribution in your portfolio depend on the funds offered
to you?
Naive diversification
48. Why do you never choose the safest or the most risky mutual funds?
Aversion to extremes
49. Why does your financial advisor offer you only a portion of his assortment of
investments?
The difficulty of choosing
50. Why does automatic enrolment increase participation of employees in retirement
savings plans?
Omission bias
51. Why is it necessary to ask an exorbitant price when you sell your home?
Anchoring
52. Why does checking the performance of your investments everyday encourage the
buying of bonds?
Myopic loss aversion
Bonus Chapter
Real estate: more than an investment
How purchasing real estate affects life beyond financial performance
53. Do home owners change residence more often than renters?
Property and mobility
54. Are property owners employed at a higher rate than renters?
Home ownership and employment
55. Do owners live more happily than renters?
Ownership and psychological well-being
56. Are owners in better shape than renters?
Ownership and physical health
57. Are children of owners more successful than those of renters?
Homeownership and the behaviour of children
200 pages, Paperback
