Regular readers of my books and articles are likely well aware that I’m a big fan of the field of behavioral finance. In fact, I try to read everything I can on the subject. The first half of my book, “Investment Mistakes Even Smart Investors Make and How to Avoid Them,” discusses many of the investment errors behavioral economists have found, in addition to explaining how you can avoid them.
While the financial establishment focused on developing “normative” theories describing how investors act as “Econs” (who make rational choices leading to optimal decisions), behavioralists instead focused on “descriptive” theories describing not how investors should act logically, but how they actually do act as human beings (who are subject to all kinds of biases that lead to less-than-optimal choices).
Read the rest of the article on ETF.com.