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Center for Behavioral Finance Publications

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Do Smartphones Make Us Too Loss-Averse?

New research shows how excessive portfolio monitoring can cause investors to focus too much on losses—and even make bad decisions. Minimizing "myopic loss aversion" takes a long-term focus and good digital design.PDF Download
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Econs, Humans and the Perception of Risk

​For most people, bad surprises loom larger than good ones, but our asymmetric perception of gains and losses is missing from typical risk measures like standard deviation. In this new paper, the Center uses proprietary research to investigate how we perceive risk and outlines the implications for investors.PDF Download

When Your Pension Offers A Choice

When I read about the General Motors retirees who were struggling to decide whether they should take a lump sum payout from the company or continue to receive a monthly check from annuity, I knew immediately what I would do, I'd take the money and run. PDF Download

A pension strategy that’s worth

Quick quiz: A shop has a sale and all its items are half price. Before the sale, a sofa cost £300. What will its sale price be? Here’s another question: if five people have the winning numbers in the lottery, and the prize is £2m, how much will each of them win? PDF Download

Behavioral Finance In Action Part 1 - Introduction / Two Minds at Work

Part 1 lays out the behavioral framework underlying the insights in this series- the concept of “two minds.” Each of us behaves as if we have an “intuitive mind” and “reflective mind.” This has practical implications for how financial advisors work with clients. The introduction also addresses the concept of loss aversion and its impact on decision-making. PDF Download

Behavioral Finance In Action Part 2 - Overcoming Investor Paralysis / Invest More Tomorrow

In the wake of extreme financial market volatility, investors can become reluctant to re-enter the market- even if it may be in their long-term best interest to do so. Part 2 of the series presents the “Invest More Tomorrow” strategy, designed to help investors overcome two key psychological barriers- loss aversion and procrastination- that can keep them on the sidelines. PDF Download

Behavioral Finance in Action Part 3 - Reining in Lack of Investor Discipline / The Ulysses Strategy

Part 3 introduces the Ulysses Strategy, which is especially relevant in times of market volatility. Designed to help investors avoid short-term decisions driven by emotion and intuition, this strategy requires clients to pre-commit to a rational investment plan. PDF Download

Behavioral Finance in Action Part 4 - Regaining and Maintaining Trust / Competence and Empathy

A financial crisis can undermine the trust that investors have in financial institutions, making it all the more important for financial advisors to actively build and maintain trust in their client relationships. Part 4 presents strategies that can help financial advisors demonstrate competence and empathy- key attributes to building and maintain trust. PDF Download

Behavioral Finance in Action Part 5 - Addressing the Disinclination to Save / The Behavioral Time Machine

Humans have a difficult time connecting with their future selves- a barrier to forgoing current rewards in favor of saving adequately for the future. Part 5 introduces the Behavioral Time Machine, a strategy that uses age-progression software to show investors a vivid image of their future self. PDF Download

The simple question that will

As a major pension reform sweeps the UK this year, pension providers should consider one more change. Making it would mean a million or more Britons would save for retirement, and it is as simple as choosing chocolates or bananas.PDF Download

Annuitization Puzzles

This working paper by Professors Benartzi, Thaler and Previtero looks at the institutional and behavioral factors that play a major role in determining how people handle retirement income. Appearing in the Fall 2011 issue of Journal of Economic Perspectives. PDF Download

Behavioral Finance and the Post-Retirement Crisis

In an effort to better explain and help solve the post-retirement crisis, Allianz has tapped into the vast body of academic research on behavioral finance. Allianz submitted this report in response to the US Department of Labor / Treasury Request for Information Regarding Lifetime Income Options for Participants and Beneficiaries in Retirement Plans. PDF Download
 

 

 
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Topics

Why Standard Risk Measurements Don't Add Up
For most people, bad surprises loom larger than good ones, but that fact is missing from risk measures like standard deviation. In a new paper, the Center for Behavioral Finance investigates how people perceive risk and what it means for investors.
Curing Investment Paralysis
To ease volatility-averse clients off the sidelines, advisors might consider an "Invest More Tomorrow" strategy.
Bound to Plan
A Ulysses strategy can help clients ride out market volatility by asking them to pre-commit to a rational investment plan.
Appealing to Retirement Investors
"Framing" retirement solutions in terms of income, rather than investment returns, can have a remarkable impact on their attractiveness to investors.
Save More Tomorrow
A proven program using behavioral finance to help people save more for retirement by getting them to pre-commit to it today.