Behavioural Finance
The content of this book has become ever more relevant after the recent 2007-2009 and 2011 financial crises, one consequence of which was greatly increased scepticism among investment professionals about the received wisdom drawn from standard finance, modern portfolio theory and its later developments. Modern portfolio theory suddenly appeared terribly old-fashioned and out of date for a very simple and straightforward reason: It did not work! So what is the alternative? Behavioural finance may be part of the solution, with its emphasis on the numerous biases and heuristics (i.e. deviations from rationality) attached to the otherwise exemplary rational “Homo economicus” individual assumed in standard finance. It puts a human face on the financial markets, recognising that market participants are subject to biases that have predictable effects on prices.
The content of this book has become ever more relevant after the recent 2007-2009 and 2011 financial crises, one consequence of which was greatly increased scepticism among investment professionals about the received wisdom drawn from standard finance, modern portfolio theory and its later developments. Modern portfolio theory suddenly appeared terribly old-fashioned and out of date for a very simple and straightforward reason: It did not work! So what is the alternative? Behavioural finance may be part of the solution, with its emphasis on the numerous biases and heuristics (i.e. deviations from rationality) attached to the otherwise exemplary rational “Homo economicus” individual assumed in standard finance. It puts a human face on the financial markets, recognising that market participants are subject to biases that have predictable effects on prices.
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About Peter Dybdahl Hede (View Profile)
Peter Dybdahl Hede has a M.Sc. and PhD degree in Chemical Engineering from the Technical University of Denmark and a Business Diploma (HD) in Finance from the Copenhagen Business School. Working as Customer Solutions Application Manager in a large biotech company Peters´ areas of expertise spans from Chemical Engineering and Particle Technology to Finance and Economics.
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