Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases (Wiley Finance) |  | Author: Michael M. Pompian
Publisher: Wiley
List Price: $65.00
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Rating:  16 reviews
Sales Rank: 106787
Media: Hardcover
Pages: 336
Number Of Items: 1
Shipping Weight (lbs): 1.1
Dimensions (in): 9.1 x 6.1 x 1.3
ISBN: 0471745170
Dewey Decimal Number: 332.6019
EAN: 9780471745174
ASIN: 0471745170
Publication Date: April 7, 2006
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Product Description
"Pompian is handing you the magic book, the one that reveals your behavioral flaws and shows you how to avoid them. The tricks to success are here. Read and do not stop until you are one of very few magicians."
—Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management Fear and greed drive markets, as well as good and bad investment decision-making. In Behavioral Finance and Wealth Management, financial expert Michael Pompian shows you, whether you're an investor or a financial advisor, how to make better investment decisions by employing behavioral finance research. Pompian takes a practical approach to the science of behavioral finance and puts it to use in the real world. He reveals 20 of the most prominent individual investor biases and helps you properly modify your asset allocation decisions based on the latest research on behavioral anomalies of individual investors.
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Showing reviews 1-5 of 16
 A mix of textbook and how-to October 7, 2009
another James (San Diego, CA)
Mr. Pompian has written a valuable introduction to the field of applied behavioral finance. He structures the book such that different behavioral biases are presented in short, technical, and applied discussions. This layout is helpful if the reader is looking for a modular reference book (or learns well within that pattern), but it makes the book difficult for those who desire a greater narrative flow. The ideal reader for this book is well defined: the practicing wealth manager who seeks to better adapt his or her practice to clients (or, if necessary, vice versa) without sacrificing the integrity of rational investment strategy.
It is important to note that Mr. Pompian's names, descriptions, and classifications of behavioral biases are not complete and established truth; other authors present different takes on various biases. Mr. Pompian here wins plaudits for being more thorough than most in the number of biases covered, though I found a few of his characterizations somewhat overlapping one another due to the sheer number of biases presented. He is also quite good at citing references and further reading: this book is quite well placed in the technicality spectrum as written for the practitioner -- neither simple enough for the layperson, nor sufficiently rigorous for the academic. Other texts work better for those who require more or less of a technical presentation.
To sum: this book is one of several potential good introductory texts to behavioral finance, but non-practitioners will likely find it lacking.
 Great- but misleading July 13, 2009
John R. Bergstrom (St. Paul, MN)
8 out of 9 found this review helpful
Sorry to be the dissenting opinion, but someone has to say the emperor has no clothes. Being a money manager for individuals, I -like many others- are scrambling for the "new-new" thing in portfolio development. I picked up this book because I've been trying to tie in clients' behaviors with Modern Portfolio Theory and take it to the next step of creating investment portfolio allocations given set(s) of behavior and biases. The book is aptly titled, "Behavioral Finance...."- but shouldn't have "....Wealth Management" in the title, nor should it have the subtitle- "How to build optimal portfolios that account for investor biases". (I'm contacting the publisher about that one.) Michael Pompian does a fantastic job of telling us why people do the things they do and why they act the way they do with their investments, but no where- repeat- no where, does it talk about building portfolios that account for those behaviors. That's really up to the advisor. I really soaked up the behavioral characterizations and it really enlightened me to specific clients I have, but again- don't think that the (sub)title means anything- it doesn't. This should be required reading for all those in the field, but look elsewhere if you're trying to create/manage portfolios. Each chapter ends with "Practical Application"s, but they're not worth the paper it's printed on- they're just a regurgitation of A.) the chapter itself and B.) conventional wisdom in the form of- you're the advisor- go figure it out yourself by reading more studies (lots of other studies sited in the book!). I'm giving the book three stars because it does provide behavioral analysis- the other two stars would be if Michael delivered on the title "How to build optimal portfolios..."....he doesn't. (maybe Amazon forgot to send me the accompanying workbook?!?)
 Excellent book! May 11, 2009
Ashwani Tiwari (Jalandhar, Punjab India)
One of the most important books on the subject of behavioural finance. Covers the subject in a comprehensive manner and provides great insights for constructing investment portfolios which are rational and closer to investor behaviour. Provides an excellent tool for enhancing real life returns of investor.
Illusion-busting investment guide May 4, 2009
Rolf Dobelli (Switzerland)
This excellent, practical guide helps you apply behavioral finance information to your personal wealth management. Though Michael M. Pompian chiefly addresses a readership of professional investment advisers, any investor can benefit from learning more about the irrational factors that affect investment decisions. Readers can choose among many books about behavioral finance, cognitive biases and neuroeconomics. However, very few books can match this one's hype-free, objective and accessible exposition of this subject. The author provides a brief history of behavioral finance, a thorough catalog of noteworthy investor biases, advice on how to deal with these biases, examples and the likely direction of future research in the field. getAbstract highly recommends his book for its straightforward language, which makes it widely accessible.
Pretty good, but some mistakes. December 15, 2008
owl (Boulder, CO USA)
6 out of 6 found this review helpful
This book has some good practical advice. Much of it was not very useful to me, either because (a) it was already obvious to me, or (b) it was directed at financial advisers, and I am an individual investor, not an adviser. However, I'm sure that there are many people for whom almost all the advice would be useful and needed.
The book contains minor mistakes here and there (mostly copyediting), and one major mistake: The author thinks that risk aversion is a fallacy or some form of irrationality. (This is clear in his remarks on pp. 214, 252.) In this, Pompian is implicitly rejecting a universally accepted principle of economics: the Law of Diminishing Marginal Utility (roughly, that the value of an additional dollar diminishes as your total wealth increases).
This is important, because this Law is the central reason, e.g., why it often makes sense to purchase insurance, why it makes sense to hedge bets, and why investors need to balance risk against potential reward. Failure to understand this could be a pretty serious problem for an investment adviser.
Showing reviews 1-5 of 16
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