Behavioral Finance Debiasing Investment Decision Making
IMPROVE YOUR INVESTMENT DECISION MAKING SKILLS BY APPLYING FRONT LINE INSIGHTS FROM COGNITIVE PSYCHOLOGY
Economic agents often behave irrationally: when faced with decisions involving evaluations of risk and return they often yield to emotional impulses and biases. By applying insights from cognitive psychology, the field of Behavioral Finance aims to understand how and when financial decisions of individuals are influenced by factors that are not strictly rational and often unconscious, which may lead to sub-optimal outcomes.
The increasing relevance of this approach has been vindicated by the award of the Nobel Prize in Economics to Daniel Kahneman in 2002, one of the founders of Behavioral Economics, and to Richard H. Thaler in 2017, father of Behavioral Finance.
In parallel, management experts are stressing the importance of identifying and avoiding the biases that influence business decisions in boardrooms, investment committees, and negotiation tables (a process known as debiasing).
Behavioral Finance analyzes the systematic cognitive factors that explain most of the irrational behaviors of financial agents, thus providing valuable insights that can enable professionals to make better investment decisions, and to benefit from the errors made by others. The main underlying assumption of Behavioral Finance is that our brains often process data using shortcuts and emotional filters. As a result, financial decision makers deal with the uncertainties associated with the future in an imperfect way.
In this program, participants will learn to identify all the biases, psychological traps and shortcuts that may prevent them, and others, from making the best use of their financial knowledge, especially when decisions are made under pressure, information is limited and risk is hard to assess. For example, identification of such biases will help understand the reasons that can make prices of assets depart from their fundamental values, thus creating exploitable investment opportunities.
You will audit your own decision-making framework to identify possible biases that you were unaware of and learn to manage them to enhance your performance.
After this program, you will feel more confident to tackle uncertainty and risk in your financial decisions and negotiations.
What can you expect?
This program is designed to help experienced finance professionals:
- Learn why and how our brain often leads us to the wrong financial decisions.
- Understand the mental shortcuts we use in our everyday life to help identify when they can cloud our professional judgments, or when they may be a useful tool to make snap decisions.
- Identify the main biases that may lead into predictable investment errors.
- Recognize the emotions that distort our perception of risk and return, and how to redress them.
- Avoid “groupthink” when collaborating with others.
- Identify market inefficiencies and investment opportunities created by behavioral biases.
Benefits for the participant
- Make wiser investment decisions by identifying and managing cognitive biases and psychological traps that may lead to miscalculations of risks and returns.
- Increase your confidence in your decision-making and negotiating capacities.
- Be more aware of your own biases and learn how to be systematic and self-aware in your analysis and decision-making processes.
Benefits for the company
- Reduce risk and increase returns by learning how to introduce systematic debiasing in corporate and financial decisions processes.
- Avoid groupthink and the distortions it can cause.
- Identify the investment opportunities that behavioral based market inefficiencies offer.