Behavioral economics has busted out of the stuffy world of academia and Nobel Prizes and entered the mainstream of best-selling books, podcasts and many TED talks. And it offers some powerful insights for investors. Loss aversion and ownership effect, just to name two of its tenets, can have profound impacts on how people view their savings.
What does it mean for advisers? Plenty. It can be used on the investment side to suss out undervalued stocks due to other people's irrational decisions. In fact, we have a Q&A with JPMorgan on this topic that delves into "saliency bias" among other topics.
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