BEHAVIORAL RISK ANECDOTES AND DISTURBING EVIDENCE推荐.pdf

CHAPTER 44 BEHAVIORAL RISK: ANECDOTES AND DISTURBING EVIDENCE∗ Arnold S. Wood Investment managers are expected to act rationally and to incorporate all available information into the decision - making process. Many are often wrong, however, which raises important questions about the risks associated with human judgment. Behavioral fl aws such as overconfi dence, temptation, self- interest, fear, and greed lead to irra- tional behavior and impaired judgment. In the investment arena, these fl aws are prevalent, dependable, systematic, and exploitable. Investment managers are accustomed to dealing with fi nancial risks that can be identifi ed, measured, and to some extent, controlled. This presentation addresses another type of risk, one that arises out of the fl aws in human perception and preferences. The basic paradigms underlying utility theory and rational choice are suspect. Money managers are smart, aggressive, and well paid, but are they rational in the textbook sense? The evidence is that money manager performance, on average, is no better than the pas- sive benchmarks they are assigned to beat. In fact, the copious tabs consultants keep on the performance of managers tell a dismal tale. Managers lag their benchmarks for the majority of years. Forecasting is the lifeblood of security analysts ’ careers. Forecasting accurately has all the fi nancial lure (and the trappings) of the lottery. David Dreman and Michael Berry (1995) have compiled extensive evidence, however, that analysts ’ estimates miss their mark widely ∗Reprinted from AIMR Conference Proceedings: Investing Worldwide VI (January 1996): 74– 78 . 6