Alphabrain: How a Group of Iconoclasts Are Using Cognitive Science to Advance the Business of Alpha Generation

Description

Smarter decision-making based on cognitive science AlphaBrainis the investor's guide to achieving more, doing better, and reaching higher. At its core, the magnitude of your success is based on the quality of your decisions. The problem is that human beings are poor decision-makers; we tend to approach problemsafterthey arise instead of planning for them in advance. We put too much weight on instinct, belief, and "gut feeling." We make the same mistakes over and over again--so reliably, in fact, that cognitive science can accurately predict exactly which mistakes we'll make and when. This book offers a way to understand and plan for the human mind's usual tendencies to help you make smarter investment decisions. Using a framework based on cognitive research, you'll learn how to approach decisions objectively, systematically, and constantly review your process; you'll take action based on evidence instead of intuition, and get ahead of potential problems before they get the best of you. With so much riding on the correctness of your choices, natural tendency can be a dangerous thing. This book shows you how to remove the bias and emotion to start making choices backed by hard evidence and objective data and lower your stress. Shift your processes from reactive to proactive Base decisions on reality over belief Eliminate cognitive bias and reduce common mistakes Make better decisions with a systematic, objective approach Why do we begin managing risk only once it becomes apparent? Why do wereactto the market instead of making the big decisionsbeforeemotion takes over? Investing has always been a largely reactive field, but those who dominate it approach decision-making less like a human and more like a machine.AlphaBrainshows you how to getrealabout investing, with cognitive techniques that lead to smarter, evidence-based decisions. Preface ix Acknowledgments xv About the Author xvii Part I Decision Analysis 1 Chapter 1:Marginal Improvement, Significant Impact 3 Chapter 2:Blinded by Bias 21 Chapter 3:Rational Decisions 33 Chapter 4:Decision Analysis 49 Chapter 5:How to Solve Any Problem 63 Chapter 6:Cerebral Junk Food 85 Chapter 7:The Input Paradox 101 Chapter 8:Auditing Mental Accounting 111 Part II Decisions In The Financial Context 123 Chapter 9:Mistakes at the Heart of Investment Management 125 Chapter 10:Manager Selection 135 Chapter 11:Prophecy of Value 149 Chapter 12:Mind over Matter 161 Chapter 13:Coaching 181 Chapter 14:Trading Decisions 191 Chapter 15:How to Stop Losing Money 221 Chapter 16:The Danger of Shortcuts 241 Chapter 17:The Power of the Unexpected 255 Index 275