Contents Cover Series Title Page Copyright Dedication Preface A CHALLENGING ENVIRONMENT WHY THIS BOOK? WHO SHOULD USE THIS BOOK? WHEN TO USE THIS BOOK? PLAN OF THE BOOK Acknowledgments PART ONE: Introduction to Behavioral Finance CHAPTER 1: What Is Behavioral Finance? BEHAVIORAL FINANCE: THE BIG PICTURE STANDARD FINANCE VERSUS BEHAVIORAL FINANCE THE ROLE OF BEHAVIORAL FINANCE WITH PRIVATE CLIENTS HOW PRACTICAL APPLICATION OF BEHAVIORAL FINANCE CAN CREATE A SUCCESSFUL ADVISORY RELATIONSHIP CHAPTER 2: The History of Behavioral Finance Micro HISTORICAL PERSPECTIVE ON THE LINK BETWEEN PSYCHOLOGY AND ECONOMICS MODERN BEHAVIORAL FINANCE PSYCHOGRAPHIC MODELS USED IN BEHAVIORAL FINANCE CHAPTER 3: Introduction to Behavioral Biases INTRODUCTION BEHAVIORAL BIASES DEFINED WHY UNDERSTANDING AND IDENTIFYING BEHAVIORAL BIASES IS IMPORTANT CATEGORIZATION OF BEHAVIORAL BIASES DIFFERENCES BETWEEN COGNITIVE AND EMOTIONAL BIASES DIFFERENCE AMONG COGNITIVE BIASES EMOTIONAL BIASES A FINAL WORD ON BIASES SUMMARY OF PART ONE PART TWO: Belief Perseverance Biases Defined and Illustrated CHAPTER 4: Cognitive Dissonance Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CONCLUSION CHAPTER 5: Conservatism Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 6: Confirmation Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 7: Representativeness Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 8: Illusion of Control Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE FINAL THOUGHT CHAPTER 9: Hindsight Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE PART THREE: Information Processing Biases Defined and Illustrated OVERVIEW OF THE STRUCTURE OF CHAPTERS 10 THROUGH 16 CHAPTER 10: Mental Accounting Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE THE BEHAVIORAL FINANCE APPROACH TO ASSET ALLOCATION BASED ON MENTAL ACCOUNTING CHAPTER 11: Anchoring and Adjustment Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE BONUS DISCUSSION: INVESTMENT STRATEGIES THAT LEVERAGE ANCHORING AND ADJUSTMENT BIAS CHAPTER 12: Framing Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 13: Availability Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TEST ADVICE CHAPTER 14: Self-Attribution Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 15: Outcome Bias BIAS DESCRIPTION DIAGNOSTIC CHAPTER 16: Recency Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE PART FOUR: Emotional Biases Defined and Illustrated CHAPTER 17: Loss Aversion Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 18: Overconfidence Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE A FINAL WORD ON OVERCONFIDENCE CHAPTER 19: Self-Control Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 20: Status Quo Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 21: Endowment Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 22: Regret Aversion Bias BIAS DESCRIPTION PRACTICAL APPLICATION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE CHAPTER 23: Affinity Bias BIAS DESCRIPTION RESEARCH REVIEW DIAGNOSTIC TESTING ADVICE PART FIVE: Application of Behavioral Finance to Asset Allocation and Case Studies CHAPTER 24: Application of Behavioral Finance to Asset Allocation PRACTICAL APPLICATION OF BEHAVIORAL FINANCE BEST PRACTICAL ALLOCATION GUIDELINES FOR DETERMINING BEST PRACTICAL ASSET ALLOCATION QUANTITATIVE GUIDELINES FOR INCORPORATING BEHAVIORAL FINANCE IN ASSET ALLOCATION INVESTMENT POLICY AND ASSET ALLOCATION CHAPTER 25: Case Studies CASE STUDY A: MR. NICHOLAS CASE STUDY B: MRS. ALEXANDER SUMMARY OF CASE STUDIES PART SIX: Behavioral Investor Types CHAPTER 26: Behavioral Investor Type Diagnostic Process BACKGROUND OF THE DEVELOPMENT OF BEHAVIORAL INVESTOR TYPES PSYCHOGRAPHIC MODELS OF INVESTOR BEHAVIOR EARLY PSYCHOGRAPHIC MODELS THE BEHAVIORAL ALPHA PROCESS: A TOP-DOWN APPROACH THE BIT IDENTIFICATION PROCESS