Tag Archives: Behavioural finance

Why has the Referendum debate been misunderstood?

What will the Scottish Referendum leave in its wake? A re-energised or a divided Scotland? And will the threat of divorce leave the UK scarred? Many outside observers have misunderstood the debate, triggering misplaced advice. The divisions are deep, and unlikely to be resolved in a single vote. A yes vote may not just hit […]

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Do central banks ever check their forecasting record?

The best analysts work with what they know, and minimise forecasting. Assessing a company’s strengths and the price paid for shares usually beats making projections. So why, when it comes to the economy, is this discipline set aside? The Bank of England has now worked with forward guidance for more than a year, with little […]

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Are legendary signals – Copper & VIX – still useful?

What should investors make now of the mixed signals that question the strength of global equity markets? The copper price and implied market volatility strike a strong emotional chord with many investors. There is widespread faith in the power of these indicators to signal danger. How should investors set this emotion alongside the facts of […]

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Deflation an unimagined world for investors

Experience drives what we recognise and forecast, but deflation is unfamiliar territory. Investors base analysis on what they know and understand; periods of stable or rising prices. But that is not the pattern now; Europe’s inflation outlook is steadily being revised down, but getting little attention. Even if the deflation risk is recognised, the problem […]

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Hidden agendas: Danger of anonymous stockmarket “research”

Some respected online financial sites have recently taken down more than 100 “research” articles anonymously written. The noise of this conflicted commentary, often in the guise of research, threatens to distort share prices and swamp markets. While much of this problem has been focused on the US, UK and European companies are also covered on […]

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Investors should prepare themselves and their assets; not predict

Making an annual review of portfolios is good practice for investors. Unfortunately, January may not be the best time for this. The rosy glow of last year’s performance has too much emotional appeal, and the background noise of pundits is distracting. It is tempting to project market gains for the year, or to pencil-in likely […]

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Investors find it hard to escape Optimism Bias

Some biases are so pervasive that adjustment is hard; optimism is such a deep rooted aspect of investor psychology that its impact is usually missed. A recent book, Fish Can’t See Water, describes the way in which an aspect of the environment or culture is embedded so widely that it becomes invisible. Yet, though never […]

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Smart beta investing and the seduction of labels

Smart beta is an impressive investment branding story. The name neatly encapsulates the idea of beating conventional indices consistently, but with little effort and much lower costs. Intellectually seductive, it conveys the concept of market exposure that avoids the costs and behavioural failures of active managers. And simultaneously it gives the impression of an edge […]

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Investors should question company stories

Company reporting in the UK is set to change, with new regulations coming in from September 30. The aim is a simpler, clearer and more focused presentation. Investors should also get a strategic report instead of the current business review. But, are these new rules on narrative reporting too little, too late? Recent reporting from […]

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Facts not Emotion needed in Emerging Market Fund Reports

Investment reports are designed to update investors each month, yet are often bland. Most times, this is just what investors want; brief comfort that their investments are making steady progress. But volatile markets demand more; not just handholding, but facts and honest appraisal. Investment managers’ behaviour in times of market stress can be revealing. This […]

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