Top Behavioral Finance Textbooks


This webpage provides an up-to-date list of the top behavioral finance textbooks.
Rankings are based upon the number of syllabi in which a behavioral finance book has appeared since 2015 (source: opensyllabus.org).
The most recent edition of each book is provided.

1.  Behavioral Finance: Psychology, Decision-Making, and Markets

Author(s): Lucy Ackert, Richard Deaves
Publication date: 2009-09-23
ISBN: 0324661177
ISBN-13: 9780324661170

Discover a structured, applied approach to behavioral finance with Ackert/Deaves' Behavioral Finance: Psychology, Decision-Making, and Markets. This comprehensive text links finance theory and practice to human behavior with applications in every chapter. The book builds upon principles of finance, connecting content to psychological principles of behavioral finance, including heuristics and biases, overconfidence, emotion and social forces. Readers learn how human behavior influences the decisions of individual investors and professional finance practitioners, markets, and managers. The book clearly explains what behavioral finance indicates about observed market outcomes as well as how psychological biases potentially impact the behavior of managers. Readers see, first-hand, the implications of behavioral finance on retirement, pensions, education, debiasing, and client management. This book spends a significant amount of time examining how practitioners today can use behavioral finance to further their success.

2.  Inefficient Markets: An Introduction to Behavioral Finance (Clarendon Lectures in Economics)

Author(s): Andrei Shleifer
Publication date: 2000-04-20
ISBN: 0198292279
ISBN-13: 9780198292272

The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents models of such markets. These models explain the available financial data more accurately than the efficient markets hypothesis, and generate new predictions about security prices. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.

3.  Behavioral Finance and Wealth Management: How to Build Investment Strategies That Account for Investor Biases

Author(s): Michael M. Pompian
Publication date: 2012-01-03
ISBN: 1118014324
ISBN-13: 9781118014325

The book that applies behavioral finance to the real world

Understanding how to use behavioral finance theory in investing is a hot topic these days. Nobel laureate Daniel Kahneman has described financial advising as a prescriptive activity whose main objective should be to guide investors to make decisions that serve their best interests. The reality? That's easier said than done. In the Second Edition of Behavioral Finance and Wealth Management, Michael Pompian takes a practical approach to the growing science of behavioral finance, and puts it to use for real investors. He applies knowledge of 20 of the most prominent individual investor biases into "behaviorally-modified" asset allocation decisions. Offering investors and financial advisors a "self-help" book, Pompian shows how to create investment strategies that leverage the latest cutting edge research into behavioral biases of individual investors. This book:

  • Shows investors and financial advisors how to either moderate or adapt to behavioral biases, in order to improve investment results and identifies "the best practical allocation" for investment portfolios. Using these two sound approaches for guiding investment decision-making, behavioral biases are incorporated into the portfolio management process
  • Uses updated cases studies to show investors and financial advisors how an investor's behavior can be modified to improve investment decision-making
  • Provides useable methods for creating behaviorally modified investment portfolios, which may help investors to reach their long term financial goals
  • Heightens awareness of biases so that financial decisions and resulting economic outcomes are improved
  • Offers advice on managing the effects of each bias in order to improve investment results

This Second Edition illustrates investors' behavioral biases in detail and offers financial advisors and their clients practical advice about how to apply the science of behavioral finance to improve overall investment decision making.

4.  Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing

Author(s): Hersh Shefrin
Publication date: 2002-09-26
ISBN: 0195161211
ISBN-13: 9780195161212

Even the best Wall Street investors make mistakes. No matter how savvy or experienced, all financial practitioners eventually let bias, overconfidence, and emotion cloud their judgement and misguide their actions. Yet most financial decision-making models fail to factor in these fundamentals of human nature. In Beyond Greed and Fear, the most authoritative guide to what really influences the decision-making process, Hersh Shefrin uses the latest psychological research to help us understand the human behavior that guides stock selection, financial services, and corporate financial strategy. Shefrin argues that financial practitioners must acknowledge and understand behavioral finance--the application of psychology to financial behavior--in order to avoid many of the investment pitfalls caused by human error. Through colorful, often humorous real-world examples, Shefrin points out the common but costly mistakes that money managers, security analysts, financial planners, investment bankers, and corporate leaders make, so that readers gain valuable insights into their own financial decisions and those of their employees, asset managers, and advisors. According to Shefrin, the financial community ignores the psychology of investing at its own peril. Beyond Greed and Fear illuminates behavioral finance for today's investor. It will help practitioners to recognize--and avoid--bias and errors in their decisions, and to modify and improve their overall investment strategies.

5.  The Psychology of Investing

Author(s): John R. Nofsinger
Publication date: 2017-08-17
ISBN: 041539757X
ISBN-13: 9780415397575

While traditional finance focuses on the tools used to optimize return and minimize risk, this book explains how psychology can affect our decisions more than financial theory. Covering the ways investors actually behave, this is the first book of its kind to delve into the ways biases influence investment behavior, and how overcoming these biases can increase financial success.

Now in its sixth edition, this classic text features:

  • An easy-to-understand structure, illustrating psychological biases as everyday behavior; analyzing their effect on investment decisions; and concluding with academic studies that exhibit real-life investors making choices that hurt their wealth.
  • A new chapter on the biology of investment, exploring the latest research on genetics, neuroscience, and how hormones, aging, and nature versus nurture inform our investment behavior.
  • An additional strategy for controlling biases, helping readers understand the psychology that motivates markets and how to address it.
  • Experiential examples, chapter summaries, and end-of-chapter discussion questions to help readers test their practical understanding.

Fully updated with the latest research in the field, The Psychology of Investing will prove fascinating and educational¬ for advanced students in investment, portfolio management, and behavioral finance classes as well as investors and financial planners.


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