Jeopardy! Shows Humans Don’t Maximize Profits

One of the common behavioral biases is anchoring. Anchoring is basing expectations and viewpoints on previous, often recent, information. An example would be the yield on the 10-year Treasury note. The benchmark bond yielded 1.59% today. If it were to rise over the short term to, say, 2.0%, your opinion would likely be that rates…

 

Trading More Frequently Leads to Worse Returns

This interview originally appeared in the November 2014 issue of the AAII Journal. What impact does active trading have on portfolio performance? Terrance “Terry” Odean, professor of Finance at the University of California, Berkeley, has done quite a bit of research into the performance of individual investors. He spoke with AAII on his studies and their…