" Even once we are aware of our biases, we must recognize that knowledge does not equal behavior.The solution lies in designing and adopting an investment process that is at least partially robust to behavioral decision-making errors". The advantage of the quantitative method is that it starts with the idea that most of us are temperamentally unsuited to investment, and then seeks to protect against those potential errors.If we acknowledge this flaw from the outset, we can build a process to force or trick us into exhibiting correct behaviors.Given the diversity of fields in which quantitative models outperform experts, it would be remarkable if we did not observe the phenomenon in value investment.
Thursday 29 August 2013
Knowledge does not equal behavior
" Even once we are aware of our biases, we must recognize that knowledge does not equal behavior.The solution lies in designing and adopting an investment process that is at least partially robust to behavioral decision-making errors". The advantage of the quantitative method is that it starts with the idea that most of us are temperamentally unsuited to investment, and then seeks to protect against those potential errors.If we acknowledge this flaw from the outset, we can build a process to force or trick us into exhibiting correct behaviors.Given the diversity of fields in which quantitative models outperform experts, it would be remarkable if we did not observe the phenomenon in value investment.
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