The Effects of Behavioral Biases in Money Management
Thursday, May 9, 2013, 12:00 – 1:30pm
Chair: T. Jon Williams, Ph.D., CFA
Understanding behavioral biases can help investors discriminate between sustainable investment strategies and fads. Brian is the Founding Editor of the Journal of Behavioral Finance and an experienced investment professional who has utilized behavioral concepts to manage portfolios for over 20 years. Brian will discuss common behavioral biases and how they impact investment decision making. His critique of purely quantitative investment strategies is widely known. Deficiencies Brian has highlighted include rapid over/under weight of the factors chasing the hot returns, over-utilization of simple optimizers, over-fitting of the factors, unstable correlations with practitioners using stable correlation matrices, time-period or regime specific effects, and ignorance of company fundamentals. In Hillcrest’s “Behind the Numbers: Why Optimizers Diminish Returns” (September, 2011*), we read “Perhaps the greatest problem for optimizers is that what is good for a few, may be bad for the many.” These strategies ignore the buying and selling within a behavioral cycle of information processing and emotion. Behavioral investment management utilizes market principles first, but then overlays theories of market movements and behaviors among the market participants. Of course the measurement of these inter-related but orthogonal effects is difficult. Brian will review his commentary “Fear Dominates the Markets (again)” (June, 2012), which observes “Behavior driven by fear and loss is powerful and causes us to dramatically overestimate the length of a downturn.” Finally, he will also discuss the behavioral feedback loop which was featured in his book Analysts, Lies, and Statistics which he co-authored with former Harvard Business School professor Mark Bradshaw. The subtitle of the book is “Cutting Through the Hype in Corporate Earnings Announcements.” In its Preface, we can understand why this is important “During the past 10 years, dramatic changes have occurred in the field…With so many people talking about earnings and their impact on stock prices, we felt the time was right to produce a book on the subject that would explain the changes in the field…” He always carries his latest research with him and will discuss his observations on markets now.
* All the Brian Bruce and Doug Stark papers referenced here can be found, with others, at the link below:
Brian is the Co-Founder, CEO and Chief Investment Officer of Hillcrest Asset Management LLC, headquartered in Dallas, with an additional office in Boston. Hillcrest is an institutional investment manager backed by private equity firms Grail Partners, founded by Don Putnam, and CHJ Capital, founded by Blake Grossman. Hillcrest has won 18 PSN Top Gun Awards and Lipper Best Money Manager Awards for outstanding investment performance. Before founding Hillcrest, Brian was Chief Investment Officer at PanAgora Asset Management, a $24 billion AUM subsidiary of Putnam Investments. Previously, Brian held senior investment roles at State Street Global Advisors and the Northern Trust Company. He is a co-founder of the Institute of Behavioral Finance and has also taught investments at Southern Methodist University and Baylor University. Brian is the founding Editor of The Journal of Behavioral Finance. Brian received his M.B.A. from the University of Chicago, M.S. in Computer Science from DePaul University, and a B.S. in Business Administration from Illinois State University. He is a member of the Illinois State University College of Business Hall of Fame, is a recipient of the University of Chicago Graduate School of Business CEO Award, and was awarded the SMU Cox Media Expert of the Year Award. Brian has published numerous scholarly articles and books and is the Editor of Journal of Investing, the Journal of Index Investing and the Journal of Trading.
CFALA Members: $20.00 (place cursor on amount for link)
Student Discount: $30.00 (Valid Student ID required at the event)
Non-members: $50.00 (place cursor on amount for link)
Time: 12:00 PM-1:30 PM, Lunch
Location: Omni Los Angeles
251 South Olive Street
Los Angeles, CA 90071
For directions call hotel: (213) 617-3300
Event parking at the Omni $12.00
Dress Code: Business Casual
As a participant in the CFA Institute Approved-Provider Program, the
CFA Society of Los Angeles has determined that this program qualifies
for 1 credit hours. If you are a CFA Institute member, CE credit for
your participation in this program will be automatically recorded in your CE Diary.
Methods of payment accepted: Visa/Mastercard, American Express and Discover. If you prefer to pay by check please register online and select "purchase order" as your payment option and enter your last name as the purchase order number. Mail check to: CFA Society of Los Angeles, 520 S. Grand Ave, Suite 370, Los Angeles CA 90071.
*Credit card payments will only be accepted through the secure online registration, and not by phone or email.