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CFA Refresher Readings

 

Behavioral Finance: Study Session 3

 

Study Session Materials

Complete List of CFA Program Readings

 

Topic Overview

Behavioral Finance

Behavioral finance is introduced in the first study session on portfolio management because an understanding of the psychological factors that affect investment decision making is relevant for the management of both private wealth and institutional assets. There are two important aspects of these behavioral readings that should be considered within the context of portfolio management. First, behavioral finance provides insight into investors’ perceptions and preferences regarding financial risk; such insight can be helpful for understanding and serving clients. Second, with its analysis of the rationality of individual decision making, behavioral finance may provide a theoretical basis for investment strategies that attempt to exploit deviations from market efficiency.

 

View learning outcome statements (LOS) for reading objectives.

 

Complete List of CFA Program Readings

 

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“Heuristic-Driven Bias: The First Theme”
Ch. 2, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin (Oxford University School Press, 2002) 		  View LOS
“Frame Dependence: The Second Theme”
Ch. 3, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin (Oxford University School Press, 2002) 		  View LOS
“Inefficient Markets: The Third Theme”
Ch. 4, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin (Oxford University School Press, 2002) 		  View LOS
“Portfolios, Pyramids, Emotions, and Biases”
Ch. 10, Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing, Hersh Shefrin (Oxford University School Press, 2002) 		  View LOS
"Investment Decision Making in Defined Contribution Pension Plans”
Alistair Byrne, Pensions (Palgrave Macmillan, Vol. 10, 2004) 		  View LOS
"The Folly of Forecasting: Ignore All Economists, Strategists, and Analysts"
James Montier, Global Equity Strategy (Dresdner Kleinwort, 2005) 		  View LOS
“A Survey of Behavioral Finance”
Ch. 1, Advances in Behavioral Finance, Volume II, Edited by Richard H. Thaler (Princeton University Press, 2005)
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“Alpha Hunters and Beta Grazers”
Martin L. Liebowitz, Financial Analysts Journal (CFA Institute, September/October 2005)
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