<p><font size="2"><font color="#555555">This book describes the important psychological biases that influence&nbsp;investment</font><font color="#555555"> decisions. By recognizing, understanding, and avoiding these problems, investors </font><font color="#555555">can minimize the negative effects on their wealth.</font></font></p><p></p><p><font color="#555555" size="2">Table of Contents:<br/>TABLE OF CONTENTS<br/>INTRODUCTION&nbsp; xi<br/>Chapter 1 Your Behavior Matters!&nbsp; 2<br/>Why Haven’t I Heard of This Before?&nbsp; 4<br/>A Simple Illustration&nbsp; 4<br/>Prediction&nbsp; 5<br/>Behavioral Finance&nbsp; 8<br/>The Investment Environment&nbsp; 8<br/>Endnotes&nbsp; 10<br/>1 NOT THINKING CLEARLY&nbsp; 11<br/>Chapter 2 Overconfidence&nbsp; 12<br/>Becoming Overconfident&nbsp; 14<br/>Illusion of Knowledge&nbsp; 14<br/>Illusion of Control&nbsp; 18<br/>Recipe for Disaster?&nbsp; 19<br/>Endnotes&nbsp; 20<br/>Chapter 3 Overconfidence and Investing&nbsp; 22<br/>Overconfidence: A Case Study1&nbsp; 23<br/>Overconfidence and Trade Frequency&nbsp; 25<br/>Gender Differences&nbsp; 25<br/>Trading Too Much&nbsp; 26<br/>Overconfidence and Risk&nbsp; 28<br/>Overconfidence and Experience&nbsp; 29<br/>Mutual Funds&nbsp; 30<br/>Overconfidence and the Internet&nbsp; 30<br/>Summing Up&nbsp; 31<br/>Endnotes&nbsp; 32<br/>Chapter 4 Status Quo—Or What I Own Is Better!&nbsp; 34<br/>Endowment Effect&nbsp; 35<br/>Endowment and Investing&nbsp; 36<br/>Status Quo Bias&nbsp; 37<br/>Attachment Bias&nbsp; 40<br/>Overcoming These Biases&nbsp; 41<br/>Endnotes&nbsp; 43<br/>InvestMadness-00 Fnt&nbsp; 6/1/01&nbsp; 3:22 PM&nbsp; Page vii2 EMOTIONS RULE&nbsp; 45<br/>Chapter 5 Seeking Pride and Avoiding Regret 46<br/>Disposition Effect&nbsp; 47<br/>Do We Really Sell Winners?&nbsp; 49<br/>Selling Winners Too Soon and Holding Losers <br/>Too Long&nbsp; 51<br/>The Disposition Effect and the Media&nbsp; 51<br/>Avoiding the Avoiding of Regret&nbsp; 52<br/>In Summary&nbsp; 54<br/>Endnotes&nbsp; 55<br/>Chapter 6 Double or Nothing 56<br/>House-Money Effect&nbsp; 57<br/>Snake-Bit (Risk-Aversion) Effect&nbsp; 58<br/>Break-Even Effect&nbsp; 59<br/>Would You Buy This IPO?&nbsp; 60<br/>The Tech Bubble&nbsp; 62<br/>Endnotes&nbsp; 64<br/>Chapter 7 Social Aspects of Investing 66<br/>Sharing Investment Knowledge&nbsp; 67<br/>Moving with the Herd&nbsp; 68<br/>Speed Is of the Essence (Not)&nbsp; 69<br/>Investment Clubs&nbsp; 71<br/>Beardstown Ladies&nbsp; 71<br/>Investment Club Performance&nbsp; 72<br/>Investment Clubs and Social Dynamics&nbsp; 73<br/>Summing Up&nbsp; 74<br/>Endnotes&nbsp; 75<br/>3 FUNCTIONING OF THE BRAIN&nbsp; 77<br/>Chapter 8 Mental Accounting 78<br/>Mental Budgeting&nbsp; 80<br/>Matching Costs to Benefits&nbsp; 80<br/>Aversion to Debt&nbsp; 82<br/>Sunk-Cost Effect&nbsp; 82<br/>Economic Impact&nbsp; 84<br/>Mental Accounting and Investing&nbsp; 84<br/>Endnotes&nbsp; 86<br/>VIII INVESTMENT MADNESS Table of contents<br/>InvestMadness-00 Fnt&nbsp; 6/1/01&nbsp; 3:22 PM&nbsp; Page viiiChapter 9 Mental Accounting and Diversification 88<br/>Mental Accounting and Portfolios&nbsp; 89<br/>Risk Perceptions&nbsp; 91<br/>Risk Perception in the Real World&nbsp; 96<br/>Building Behavioral Portfolios&nbsp; 96<br/>Summing Up&nbsp; 98<br/>Endnotes&nbsp; 99<br/>Chapter 10 That’s Not the Way I Remember It 100<br/>Memory and Investment Decisions&nbsp; 102<br/>Cognitive Dissonance&nbsp; 103<br/>Cognitive Dissonance and Investing&nbsp; 104<br/>Cognitive Dissonance and the Steadman Funds&nbsp; 105<br/>Memory and Socialization&nbsp; 106<br/>Reference Points&nbsp; 107<br/>Summing Up&nbsp; 109<br/>Endnotes&nbsp; 110<br/>Chapter 11 What I Know Is Better&nbsp; 112<br/>Representativeness&nbsp; 113<br/>Representativeness and Investing&nbsp; 114<br/>Familiarity&nbsp; 116<br/>Familiarity Breeds Investment&nbsp; 117<br/>Familiarity Breeds Investment Problems&nbsp; 119<br/>Endnotes&nbsp; 121<br/>4 INVESTING AND THE INTERNET&nbsp; 123<br/>Chapter 12 The Internet (Psycho) Investor&nbsp; 124<br/>The Rise of the Internet Investor&nbsp; 125<br/>Amplifying Psychological Biases&nbsp; 126<br/>Information and Control&nbsp; 126<br/>Online Trading and Overconfidence&nbsp; 128<br/>Advertising—Increasing the Biases&nbsp; 129<br/>Online Trading and Performance&nbsp; 130<br/>Day Traders—The Extreme Case&nbsp; 130<br/>Summing Up&nbsp; 132<br/>Endnotes&nbsp; 133<br/>INVESTMENT MADNESS Table of contents IX<br/>InvestMadness-00 Fnt&nbsp; 6/1/01&nbsp; 3:22 PM&nbsp; Page ixChapter 13 Exuberance on (and about) the Net 134<br/>A Rose.com by Any Other Name&nbsp; 135<br/>A Bubble Burst&nbsp; 137<br/>The More Things Change…&nbsp; 138<br/>The Boiler Room Goes Online&nbsp; 140<br/>Endnotes&nbsp; 143<br/>5 WHAT CAN I DO ABOUT IT?&nbsp; 145<br/>Chapter 14 Self-Control, or the Lack of It! 146<br/>Short-Term versus Long-Term Focus&nbsp; 148<br/>Controlling Ourselves&nbsp; 148<br/>Rules of Thumb&nbsp; 148<br/>Environment Control&nbsp; 149<br/>Self-Control and Saving&nbsp; 150<br/>IRAs&nbsp; 151<br/>401(k) Plans&nbsp; 151<br/>Self-Control and Investing&nbsp; 152<br/>Self-Control and Dividends&nbsp; 153<br/>Summing Up&nbsp; 155<br/>Endnotes&nbsp; 156<br/>Chapter 15 Battling Your Biases&nbsp; 158<br/>Strategy 1: Understand Your Psychological Biases&nbsp; 159<br/>Not Thinking Clearly&nbsp; 159<br/>Letting Emotions Rule&nbsp; 161<br/>Functioning of the Brain&nbsp; 162<br/>Strategy 2: Know Why You Are Investing&nbsp; 163<br/>Strategy 3: Have Quantitative Investment Criteria&nbsp; 165<br/>Strategy 4: Diversify&nbsp; 166<br/>Strategy 5: Control Your Investing Environment&nbsp; 166<br/>Additional Rules of Thumb&nbsp; 168<br/>In Conclusion</font></p><br/>