Classical economists often incorporated human behaviour into their thinking. But in the 1960s and 1970s, homo economicus - the great rational agent of economic theory - was born. It was not until the 1990s that the link between human behaviour and economics began to be re-established.
Established in 2009, Portfolio Construction Forum Markets Summit is THE investment markets scene setter of the year. With interest rates near historical lows and asset prices around all-time highs, practitioners are grappling with the defensive side of multi-asset portfolios. Downside protection is essential in such an uncertain environment. Arguably, the best offence is a great defence! Markets Summit will help you better understand the key drivers of and outlook for the markets, and the opportunities and risks ahead on a three- to five-year view, to aid your search for return and to help them build better quality investor portfolios.
Beliefs interact with investors' biases and preferences to ultimately influence their behaviour. Two recent papers highlight the impact of individual investors' beliefs about the future and the impact on portfolio behaviour and composition, as well as market returns.
Relatively little is known about what greed is and does. These two papers highlight the importance of greed in economic behaviour, and to a greater chance of engaging in ethically questionable behaviour.
Culture explains much about how we think, feel, and behave. These two papers explore the influence of culture and cultural distance in a financial context.
Understanding what has really changed in people's values as a result of Covid-19 and the influence of emotions will prepare us for the increasingly polarised economic, geopolitical, social and environmental new world order.
These two papers provide a more sophisticated, behavioural understanding of time discounting, to enable more nuanced conversations with clients about current and future consumption, and help mitigate the potentially negative impacts of present bias.
It turns out that 'retiring’ and withdrawing from productive life actually conflicts with our own natural drivers of well-being. The concept of ‘retirement’ is an obsolescent by-product of the industrial era that needs to be retired.
These two research papers present insights into how advisers can better assess and guide how clients think about and structure goals - including savings goals.
The Investment Management Research Program is the academic research unit of Portfolio Construction Forum, the specialist, independent provider of portfolio construction continuing education, accreditation and certification services in Australia and NZ. The IMR Program aims to advance investment management research by curating courses, workshops and symposia focused on the spectrum of issues involved in designing and building investment portfolios.
We make automatic assumptions on a daily basis. A critical assumption is that our pre-crisis investment management toolkit will remain relevant in the future.
Memory is far from being a repository of neutral, reliable information and accounts of past events. This Research Review focuses on a seminal paper published in 1999 on "the seven sins of memory", and a recent 2019 paper on how memory errors impact investment decisions.
The move to compulsory superannuation placed huge responsibility on individuals to manage their portfolios. A regular response is to educate people to a higher level of financial literacy.
Most of us want to act on our values, but we also need to feel that we have a reasonable chance of doing so effectively and successfully. Rather than focus on ethical analysis, focus on ethical implementation.
Refocusing sustainable investing efforts onto client values and beliefs starts a chain reaction that delivers sustainable outcomes for clients and long-lasting relationships.
New research shows that media sources generate emotions that transmit to individuals and so influence their investment decisions, resulting in a departure from so-called efficient markets.
By identifying their own systematic patterns of departure from "rational" behaviour, practitioners can compensate for their effects, and improve the quality of their day-to-day investment decision-making.
Over shorter periods of time, there are market inefficiencies due to well researched behavioural biases. Knowledge of these can help improve our own investment decision making and that of our clients.
Several of our Faculty discuss their key takeouts from Finology Summit 2020, to help delegates think through how people's different investing biases, beliefs and behaviours impact investment outcomes.
Using the language of client values and behaviour will help build a foundation of trust, and assist investment advisers architect a portfolio that is in sync with clients' lives and values.
A fixed point of reference, in the context of investment risks and uncertainties, can induce biases in approaches to meet client objectives. These biases will be costly to investors in the long term.
As we scramble to make sense of occurrences such as coronavirus and climate change, the application of prior cultivated imagination can preserve the integrity of investment decision making.
Established in 2016, Finology Summit is THE behavioural finance ("fin") and investment psychology ("ology") program of the year. The 1.5-day, face-to-face and online learning program is designed and curated by our specialist, experienced and independent team and features an exceptional Faculty of experts from around the world. Each offers his/her best high conviction ideas on behavioural finance and/or investor psychology, and the investment implications.
Finology is an interesting and unique mix of behavioural finance (“fin”) and investor psychology (“ology”) as it relates to giving investment advice to individual investors. Finology is where investing meets investors™. The finology discipline focuses on identifying investing biases, beliefs and behaviours and the investment outcomes. To achieve this, finology connects behavioural finance and investor psychology - encompassing "know the markets", "know yourself" and "know your clients". Finology knowledge and skills help us better identify and understand how our own and other people's different investing biases, beliefs and behaviours impact investment markets and portfolio construction practices - and therefore, investment outcomes - to enable better quality investor portfolios.
Trade Wars, the US Election, Brexit 3.0, natural disasters and pandemic risks are causing fear and uncertainty in Australian equity investors. The key to capturing opportunities is to focus on what matters to long-term returns.
To fully appreciate the risks and opportunities in a high VUCA environment, portfolio construction practitioners must adopt a mindful approach in order to adapt to unexpected events.
Financial decisions are among the most important life-shaping decisions we make. Two recent research papers provide further evidence as to how practitioners can help improve clients' financial decisions.