Curriculum·Sophomore·S208
Behavioral Finance and the Operator
Barber and Odean, Journal of Finance, 2000.9 percent.
Lesson 1 opens on
The disposition effect, measured
Terrance Odean examined trading records from 1987 to 1993 for 10,000 accounts at a large discount brokerage and found that investors realized gains far more readily than losses.098, meaning winners were sold at roughly one and a half times the rate of losers, and the preference held when gains and losses of similar size were compared, in fourteen of fifteen partitions by share price and size of return.4 percentage points more over the following year than the losers they kept.
The lessons
- S208-01The bias catalog, appliedName the six biases that produce most measurable damage in this asset class, in their operational formabout 31 min · opens on The disposition effect, measured
- S208-02Overconfidence, measuredDistinguish confidence from calibration, and explain why only the second can be measuredabout 31 min · opens on Day trading for a living, measured
- S208-03Social contagion and product designIdentify the design features that increase trading frequency, and name what each one exploitsabout 30 min · opens on Confetti, and the $7.5M it cost
- S208-04When this stops being investingName the behavioral markers that distinguish investing from a compulsion, without moralisingabout 31 min · opens on What the screening studies found
- S208-05Building a personal operating systemAssemble the five artifacts this Academy has asked you to write into one operating systemabout 31 min · opens on Frequency, not selection, applied to the reader
Labs
S208-L
Calibration re-test and decision journal
Calibration re-test with delta reporting against baseline, plus a written decision-journal entry on a real past decision separating process from luck.