Behavioral Finance and Quantitative Strategies
Table of Contents
- Introduction
- What is Behavioral Finance?
- Cognitive Biases in Investment Decision Making
- Market Anomalies
- Quantitative Strategies and Behavioral Finance
- Summary
Introduction
Welcome to the fourteenth course in our series on quantitative finance and investment. In this course, we introduce behavioral finance and its implications on quantitative strategies. We will delve into cognitive biases, market anomalies, and investment strategies that take advantage of these factors.
What is Behavioral Finance?
Behavioral finance is a field of study that combines psychology and economics to explain why and how investors act and to analyze how this behavior affects markets and financial outcomes.
Cognitive Biases in Investment Decision Making
Investors are not always rational. They are influenced by a variety of cognitive biases such as overconfidence, anchoring, confirmation bias, and loss aversion. We’ll explore these biases and how they can affect investment decision making.
Market Anomalies
Market anomalies are patterns or behaviors in the financial markets that seem to contradict the efficient market hypothesis. We will discuss several such anomalies and their implications on investment strategies.
Quantitative Strategies and Behavioral Finance
Quantitative strategies that take into account behavioral factors can potentially achieve superior returns. We will delve into several such strategies, explaining their mechanisms and discussing their potential benefits and risks.
Summary
This course introduced behavioral finance and its implications on quantitative strategies, providing a comprehensive overview of cognitive biases, market anomalies, and investment strategies that take advantage of these factors.