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Financial Times
Profiting From The Irrational
Long View: Profiting from the irrational
By John Authers
Published: January 30 2009 18:59 Last updated: January 30 2009 18:59
We can always rely on human irrationality. Whatever happens in the markets and in the world economy, people will continue to do stupid things. The question is whether they will do so predictably enough for the rest of us to take advantage.
Psychological research over the past three decades suggests that we may well be “predictably irrational” – that, indeed, was the title of an unlikely best-seller last year by the Massachusetts Institute of Technology’s Dan Ariely. It documented experiments, mostly carried out with MIT’s highly intelligent young students as guinea pigs, that showed how they would predictably fall victim to what are known as heuristics – mental short-cuts that help them survive in the hurly-burly of normal life, but can also lead them into irrationality when trying to make decisions in the financial realm.
Read full article: http://www.ft.com/cms/s/0/a33e54d0-eefd-11dd-bbb5-0000779fd2ac.html?nclick_check=1
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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