Great article on behavioral finance

[indythinker85]

http://compoundingmyinterests.com/compounding-the-blog/2012/10/12/learning-risk-and-behavioral-economics-with-the-santa-fe-ins.html

[value-is-what-you-get]

Thanks Indy and welcome to the board! 

 

Munger, who is an expert on the foibles of bias, says no matter how much he overestimates the effects of psychological bias, he always falls short to whAt reality dishes up. 

[indythinker85]

Interesting comments from Lipper:

 

I do not know when and from what sector a bubble will appear. Others have identified bubbles in 1929, 1962, 1987, 1998, 2000 and 2008. I could add some others that I have lived through. The main point is that we could be due for one, and it will be called an upside breakout to recognize how productive the world will be in the future. What has me particularly concerned is that various studies at Caltech and elsewhere have found that many participants in a simulated bubble knew it was risky, but were playing the so-called “bigger fool theory” — knowing full well that were paying too much but believing that they could sell at a bigger price. When the eventual decline is underway the most likely panickers will be the bigger fools turning on themselves. http://www.valuewalk.com/2013/11/behavior-patterns-help-hurt/

[worldaccordingtoGARP]

Indy, thanks for linking to my blog! Didn't even realize this was linked to on here.

 

I just did an interview with Michael Mauboussin that I published today. He is one of the most informative people in finance. Figured some on the board would like it, covering the Santa Fe Institute and topics like complex adaptive systems, mental models and feedback loops:

 

http://compoundingmyinterests.com/compounding-the-blog/2013/11/7/michael-mauboussin-on-the-santa-fe-institute-and-complex-ada.html