Dora's Journal
• Nov. 9, 2008 - JACK: “The basement.”’
It comes to something when you make a habit of watching the opening Normandy landings sequence of ‘Saving Private Ryan’ just to relax. Where conventional fund management theory is hugely deficient is in its almost complete absence of reference to the emotional impact of huge volatility, let alone both mark to market and realised losses. As Mike Tyson once said, everyone has a plan until they’re punched in the mouth. Though to be fair, behavioural economics addresses the cognitive and emotional factors that affect investment decisions. And there’s a book on my bookshelf with the title ‘Judgment under uncertainty: heuristics and biases’. Amid multiple markets (certainly not just equities) tossed so brutally and seemingly randomly this way and that, heuristics (“methods to help solve problems, commonly informally”) are one of the few things of practical use. To address the ‘why’ of volatility: presumptions that investors are pricing in horrific global economic contrac...
Originally from: http://www.greenfaucet.com/the-market/diamonds-admist-rubble/60266 |
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