Ethical blindness is one answer to the question "Why do good people do bad things?" Together, these two papers strongly reinforce the idea that ethical practice requires that we regularly hit the brakes and check our ethical blind spots.
At one extreme, the whole investment decision-making process could be turned over to AI - at the other, it can just be used in data collection. These two papers capture the challenges of integrating AI into funds management and financial advice processes.
The financial services industry has long embraced the potential of AI-based systems including robo-advice. These two papers review the psychological and relational dynamics that arise from "algorithm aversion".
Short breaks can improve decision-making and overall performance. A 2023 study found that holidays "meaningfully improve" the accuracy of equity analysts' earnings forecasts.
Powerful geopolitical, demographic, environmental, technological and sociological trends are reshaping our world, impacting investment risk and uncertainty and how best to design portfolios capable of improving the financial well-being of individuals.
Our diverse panel of experts identified their key takeouts from Strategies Summit 2024 and the portfolio construction implications.
Multi-asset, multi-manager investment portfolios can be viewed as complex machines that, if properly assembled and managed, provide benefits far outweighing those of their individual components. The whole is definitely greater than the sum of its parts! Strategies Summit 2024 (Wed-Thu 21-22 Aug) challenges and refreshes your portfolio construction thinking by debating contemporary and emerging portfolio construction strategies to help you build better quality portfolios.
Wetware-powered AI is changing the way we manage risk and uncertainty, including in financial markets. Its rise will also profoundly change how humans think about the nature of reality — in finance and more generally.
Read any book on Complexity Science and the first example of a Complex Adaptive System is the economy and financial markets. Complex systems exhibit "emergence" which means that the whole is always more than the sum of its parts.
I was speaking to a new doctoral student whose thesis is on the role of risk profiling in the development of an investment strategy. This led us to discuss why risk profiling was important and the purpose of investment advice.
The Big Five model of personality traits remains the dominant framework in personality research. Increasingly, it appears that aspects of investor sentiment and decision-making can also be explained by Big Five personality traits.
With Australian insolvencies at a 25-year high and corporate debt defaults rising globally, many investors are hoping that central banks will significantly reduce interest rates. But Coolabah Capital's Chris Joye thinks differently.
It is well-established that investors and service providers should take human behaviour into account when making financial decisions. These papers look at how two techniques drawn from psychology - financial nudging and financial mindfulness - can influence investor behaviour.
When evaluating investment performance, we generally acknowledge a fundamental distinction between skill and luck. This research paper looks at the concept of “moral luck” and finds that the outcome of an investment recommendation may shape others’ evaluations of both the skill and the morality of the investment adviser.
The idea that individuals are more sensitive to losses than to equivalent gains is critical in investment decision-making. Two recent papers highlight that loss aversion/tolerance is a more nuanced phenomenon than is commonly recognised.
The future state of the economy and markets depends, in part, on what people expect it will be. Understanding people's expectations, and how and why they form and revise them, has important implications for portfolio construction practice.
In 1990, Towers Perrin started spruiking the modern-day investment mandate. I must admit the concept of making investment managers far more accountable seemed rather good. Unfortunately, it most likely left clients worse off.
We are in an investment environment like that of the pre-GFC period. Bonds will offer higher levels of both income and diversification, within a multi-asset portfolio.
Established in 2016, Portfolio Construction Forum Finology Summit is THE behavioural finance ('fin") and investor psychology ("ology") program of the year. It will help you better identify and understand how your own and other people's different investing biases, beliefs and behaviours impact investment markets and portfolio construction practices - and therefore, investment outcomes - to help you build better quality investor portfolios.
This paper provides a comprehensive review of the psychology of attention and its relationship to key economic concepts (utility, risk-taking, social preferences, and learning), and the emerging role of AI in the modern economy.