Behavioral Portfolio Selection
Published Online: 15 MAY 2010
Copyright © 2010 John Wiley & Sons, Ltd. All rights reserved.
Encyclopedia of Quantitative Finance
How to Cite
Shefrin, H. 2010. Behavioral Portfolio Selection. Encyclopedia of Quantitative Finance. .
- Published Online: 15 MAY 2010
Portfolios satisfy both financial needs and psychological needs. Behavioral portfolio selection is a framework for understanding how psychology impacts investors' portfolios. Whereas risk and return are the central variables in neoclassical portfolio selection, the behavioral approach emphasizes the roles of emotions such as hope and fear, aspirations, the framing of outcomes as gains or losses relative to reference points, regret aversion, self-control, and judgmental biases.
- SP/A theory;
- prospect theory;
- narrow framing;
- biases, disposition effect;
- attention hypothesis;
- overreaction effect;
- lottery stocks;