Biases when choosing which assets to look at

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來自 University of Geneva 的課程

Meeting Investors' Goals

907 個評分

University of Geneva

Meeting Investors' Goals

907 個評分

課程 2（共 5 門，Specialization Investment Management）

In this course, you will dive into the concepts of rationality and irrationality and understand how they impact our investment decisions and what the consequences can be at the market level. You will first explore the different biases that we, as humans, are subjected to when facing investment decisions and how they may impact the outcomes of these decisions. Moreover, you will see how emotions and ethical concerns such as honesty and trust influence market participants. When they are considered as a group rather than individually, you will discover how rationality and irrationality can drive asset prices to and away from their fair value. Finally, you will be presented with different portfolio construction methodologies and investment styles that make up the landscape of today's portfolio management industry. At key points throughout the course, you will benefit from the practical knowledge of experts from our corporate partner, UBS, in how to build and manage clients' portfolios.

從本節課中

How Individuals Make Financial Decisions

The focus of this second week is on you, the investor: what are the reasons you participate in financial markets? How do you make investment decisions? What can go wrong in your decision process and what are the consequences? What can you do about it? To answer these questions, we will talk about cognitive biases, emotions and moral values and their respective link with investment decisions.

How our brain may misinterpret information4:55

The basic steps in investment2:00

Biases when choosing which assets to look at3:25

Biases when processing financial information4:38

Biases when rebalancing you portfolio4:55

Biases when evaluating performance2:41

與講師見面

University of Geneva- Tony Berrada
SFI Associate Professor of Finance
Geneva Finance Research Institute
University of Geneva- Jonas Demaurex
Teaching Assistant
Geneva Finance Research Institute
University of Geneva- Rajna Gibson Brandon
SFI Senior Chaired Professor of Finance and Managing Director of the GFRI
Geneva Finance Research Institute
University of Geneva- Michel Girardin
Lecturer in Macro-Finance - Project Leader for the "Investment Management" specialization
Geneva Finance Research Institute
University of Geneva- Kerstin Preuschoff
Associate Professor of Neurofinance and Neuroeconomics
Geneva Finance Research Institute
University of Geneva- Olivier Scaillet
SFI Senior Chaired Professor of Finance and Vice-dean (research) at GSEM
Geneva Finance Research Institute
University of Geneva- Philip Valta
SFI Assistant Professor of Finance
Geneva Finance Research Institute

[MUSIC]

We've just described the three stages of a basic investment decision.

The first one was to select your investment universe.

What asset are you going to consider for your allocation?

So what can go wrong?

>> Well, here's your problem, when you want to invest in the stock market,

there's a lot of information to process and a lot of information to choose from.

So how do you do this?

So let's reduce the set for you a little bit and

give you a few stocks to chose from.

Now, tell us if you had to pick two to take a closer look at,

which ones would you pick?

>> So let's give you a minute to think about this.

Based on your selection, we can probably say something about where you're from.

You see all these securities have been chosen not completely at random.

We've selected pairs oo groups of securities that are from the same

geographical area.

In this slide,

we're highlighting in different colors stocks that were from the same region.

So if, for example, you've selected Siemens and BASF,

you're probably from Germany.

And this is something that people do when they construct their portfolio.

This is called home bias.

We tend to over invest in securities that we think we have a lot more

information about.

This is not necessarily true, but we consider that securities that we know

from because they are in our country, we somehow have more information

about them and we should hold more of them in our portfolio.

>> In the same way that we tend to over invest into local stocks,

we also tend to over rate recent information.

So, if you've just recently heard about a company doing really well, or

having trouble.

You may over rate that information and ignore everything that happened before.

This is what we call recency bias.

Ignoring information that's a little bit older and

placing too much emphasis on recent information.

>> Well, recency and home bias are actually two example of

a larger class of biases that we call availability bias.

Let me try to explain this concept in a little bit more detail.

We face decision that are based on a very large set of information.

We are more comfortable in we're focusing our attention on a smaller subset.

The question is how do we select the smaller subset.

Do we choose it at random, probably not,

just as Kirsten pointed out, we look at readily available data.

Whether it is recent, this is the recency effect, or

whether we think we know a lot more about it, this is the home bias effect,

we know more because this is information that we're familiar with.

And all of these biases may impact the way

you choose the security you're investing in, in a bad way.

So one advice that we could properly give to try and

avoid this problem is to get out of your comfort zone.

Try to get data that is not necessarily easy to access and

don't focus your attention on what's readily available.

Do some research, extensive research, and

try to gather as much information as possible.

[MUSIC]

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