The [i3] Equity Luncheon 2022, held in partnership with UBS Asset Management, saw Simon Russell, Director of Behavioural Finance Australia, discussing his new book on behavioural finance in institutional equity teams and give real life examples of how bias creeps into decision making.
Behavioural finance has given us fascinating insights into the biases and preconceptions that people face when making financial decisions, but much of the research applies to relatively naive, individual investors, or even university students.
Professional investors are different. They have usually built their expertise on years of study and experience. And their decisions often result from following thorough and detailed investment processes.
Yet, despite the notion that these investors might be more aware of the pitfalls of inherent biases, they are not immune to them.
For example, anchoring and confirmation bias still affect most investment specialists.
Simon Russell, Founder and Director of Behavioural Finance Australia, for many years has studied how some of the learnings from this field of study might apply to institutional investors and their broader investment teams.
Russell has now condensed his knowledge in his fourth book: “Behavioural Finance – A guide for listed equities teams”.
The book explores how to ensure that financial forecasts are robust, while adequately accounting for easily overlooked statistical processes, such as mean reversion. It looks at strategies for knowing when to sell, while mitigating the risks of confirmation bias and loss aversion.
