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Index
Title Page
Copyright Page
Dedication
Preface
GOOD INVESTING IS MORE THAN BOOK SMARTS
ORGANIZATION OF THIS BOOK
Acknowledgments
About the Author
Introduction
BRAINS OF STEEL . . . ARE NOT ENOUGH
CALCULATING THE MADNESS OF MEN
MARK TWAIN AND THE “SILVER FEVER”
WHAT’S THE USE OF NEUROFINANCE?
PART I - Foundations
CHAPTER 1 - Markets on the Mind
ANALYSTS AND DART BOARDS
DEVELOPING BETTER EXPECTATIONS
“THE WISDOM OF THE COLLECTIVE”
METEOROLOGICAL ANOMALIES AND OTHER ANIMAL SPIRITS
SENTIMENT
CHAPTER 2 - Brain Basics
DAMASIO AND THE IOWA GAMBLING TASK
THE BRAIN: STRUCTURE AND FUNCTION
THE BRAIN-DAMAGED INVESTOR
RESEARCH METHODS
NEUROSCIENCE PREVIEW
CHAPTER 3 - Origins of Mind
EMOTIONS AND PERCEPTIONS
EXPECTATIONS AND THE COMPARATOR
COUNTERFACTUAL COMPARISONS
BELIEFS AND EXPECTATIONS: THE PLACEBO EFFECT
MAKING SENSE OF THE NEWS
SELF-DECEPTION
EMOTIONAL DEFENSE MECHANISMS AND MOTIVATED REASONING
CHAPTER 4 - Neurochemistry
INTRODUCING THE NEUROTRANSMITTERS
THE CHEMISTRY OF (FINANCIAL) MENTAL DISORDERS
THE NEUROCHEMISTRY OF FINANCIAL PERFORMANCE
SEROTONIN AND MARKET BUBBLES
RECREATIONAL DRUGS AND ALCOHOL
PART II - Feelings and Finances
CHAPTER 5 - Intuition
ANALYSIS AND INTUITION
INVESTMENT PRACTICE
WHAT DOES YOUR “GUT” TELL YOU?
LISTENING WITHOUT THINKING
INTUITION AND EMOTION IN INVESTING
EMOTIONAL INTELLIGENCE
SUBLIMINAL EMOTION
STIRRING THE UNCONSCIOUS
CHAPTER 6 - Money Emotions
EMOTIONAL BIASES
THE DIFFERENCE BETWEEN POSITIVE AND NEGATIVE FEELINGS
REGRET AS A SELF-FULFILLING PROPHECY
AN AMICABLE DIVORCE
SADNESS AND DISGUST
FEAR AND ANGER
PROJECTION BIAS
MANAGING FEELINGS
SUMMARY
CHAPTER 7 - Excitement and Greed
BROKERS KINDLE IRRATIONAL EXUBERANCE
THE ANATOMY OF STOCK HYPE
GREED: THE BASICS
THE BIAS TASK
THE NUCLEUS ACCUMBENS
EXCITED ABOUT A GOOD DEAL
IMPROVING BIASED DECISION MAKING
GREED IN THE MARKETS
CHAPTER 8 - Overconfidence and Hubris
THE PSYCHOLOGY OF HUBRIS
OVERCONFIDENCE
ILLUSION OF CONTROL
WINNING CHANGES THE BRAIN
THE NEUROCHEMISTRY OF EXPLORATION
ONE WHO KNOWS: CHRISTIAN SIVA-JOTHY
CONFIDENCE—THE “GOOD” KIND
SOLUTIONS
CHAPTER 9 - Anxiety, Fear, and Nervousness
CLIMBING A WALL OF WORRY
DREAD IN THE MRI
NATURE VERSUS NURTURE
IT’S ALL IN YOUR HEAD
EMPATHY GAPS
PAIN RELIEF
INVESTMENT LESSONS
OF HURRICANES, RISK PERCEPTIONS, AND OPPORTUNITY
SUMMARY
CHAPTER 10 - Stress and Burnout
STRESS
CRAMER ON STRESS
CHOKING FOR RUPEES
WHICH GOES WRONG—THE BRAINS OR THE BRAWN?
STRESS AND TREND PERCEPTION
NEUROCHEMISTRY OF STRESS
BIOLOGICAL EFFECTS OF STRESS
ADRENALINE JUNKIES
MANAGING INVESTMENT STRESS
SUMMARY
CHAPTER 11 - Love of Risk
KNOWING WHEN TO FOLD ‘EM
PATHOLOGICAL GAMBLING
THE GAMBLER’S BRAIN
OUGHT TO KNOW BETTER
REDUCING GAMBLING
SUMMARY
CHAPTER 12 - Personality Factors
THE “BIG FIVE”
THE GENETICS OF PERSONALITY
INVESTING PERSONALITY
OTHER PERSONALITY RESEARCH
TRADING PSYCHOLOGY
PART III - Thinking about Money
CHAPTER 13 - Making Decisions
EXPECTED VALUE AND EXPECTED UTILITY
THE JACKPOT TRAP
PROBABILITY MISJUDGMENTS
VIVIDNESS, IMAGINATION, AND DESIRE
AMBIGUITY AND UNCERTAINTY
AMBIGUITY IN THE MARKETS
NEUROSCIENCE OF AMBIGUITY, RISK, AND REWARD
THE POSSIBILITY THAT YOU ARE OVERWEIGHT
THE TRUSTING BRAIN
NEUROSCIENCE OF THE ULTIMATUM GAME
THE TRUST HORMONE
IMPLICATIONS
CHAPTER 14 - Framing Your Options
THE DISPOSITION EFFECT
A FATHER-SON STOCK SALE
TEASING OUT THE PROBLEM
FRAMING RISK
A FRAME IN THE MEMBRANE
HOLDING LOSERS: “DOUBLE-OR-NOTHING!”
DIFFERENCES IN AVERSION
LETTING WINNERS RIDE
SUMMARY
CHAPTER 15 - Loss Aversion
NEUROSCIENCE OF LOSS AVERSION
THE EQUITY PREMIUM PUZZLE
THE IMPLIED PUT OPTION
OVERCOMING LOSS AVERSION
THE HOUSE MONEY EFFECT
LESSONS FROM THE POPE
COMMENTS FROM SOROS, TUDOR, AND CRAMER: “BOOYAH!”
CHAPTER 16 - Time Discounting
GET YOUR HAND OUT OF THE COOKIE JAR
BRAIN BASIS OF DELAYED GRATIFICATION
CHEMICAL IMPULSES
MONKEY BUSINESS
MAKING A KILLING IN THE OPTIONS PIT
IMPROVING SELF-CONTROL
IN PRACTICE
CHAPTER 17 - Herding
HERDING
SOCIAL PROOF
SOCIAL COMPARISON
ASCH AND CONFORMITY
INFORMATION CASCADES
STANLEY MILGRAM AND THE SHOCKING TRUTH
NICE CLOTHES, FAST CARS, AND FANCY TITLES
THE NEUROSCIENCE OF COOPERATION
ANALYSTS’ ABUSE OF AUTHORITY
THE HERDING HABIT
LIVING THE CONTRARIAN LIFESTYLE
ADVICE FOR HERD ANIMALS AND TREND FOLLOWERS
ADVICE FOR INVESTMENT COMMITTEES
CHAPTER 18 - Charting and Data Mining
ARTIFICIAL NEURAL NETWORKS
DATA MINING AND SELF-DECEPTION
FINDING PATTERNS IN THE NOISE
THE TREND AND MEAN-REVERSION BIASES IN CHART READING
OVERRELIANCE ON CHARTS
THE GAMBLER’S FALLACY
IRRATIONAL EXUBERANCE . . . CALLED TOO EARLY
THE SOOCHOW GAMBLING TASK
THE LEARNED CAUDATE
PATTERNS IN EARNINGS REPORTS
FOOLED BY RANDOMNESS
CHAPTER 19 - Attention and Memory
TERMINAL ILLNESS
REPRESENTATIVE RETURNS
FOND MEMORIES
BEATING THE HINDSIGHT BIAS
ATTENTION DEFICIT
KEEP YOUR EYE ON THE PILLS
WHAT’S IN A NAME?
CHINA PROSPERITY INTERNET HOLDINGS
“ALL THAT GLITTERS”
CHAPTER 20 - Age, Sex, and Culture
EMOTIONAL MEMORIES
THE FEMALE BRAIN: ESTROGEN, EMOTION, AND COOPERATION
FINANCIAL PLANNING FOR DIVORCEES
MALE OVERCONFIDENCE
AGE
THE SEATTLE LONGITUDINAL STUDY OF ADULT DEVELOPMENT
CULTURE (EAST AND WEST)
CHINESE RISK TAKERS
BIASES AMONG CHINESE STOCK TRADERS
PART IV - In Practice
CHAPTER 21 - Emotion Management
DO IT FOR LOVE, NOT MONEY
MONEY CHANGES YOU
EMOTIONAL DEFENSES
THE PURSUIT OF HAPPINESS
NEUROPLASTICITY
CHEMICAL STABILIZERS
SELF-DISCIPLINE
CREATING A DECISION JOURNAL
CHAPTER 22 - Change Techniques
DEALING WITH FEARFUL AND OVERCONFIDENT CLIENTS
COGNITIVE-BEHAVIORAL THERAPY AND STRESS MANAGEMENT
YOGA, MEDITATION, AND LIFESTYLE
SIMPLE STRESS REDUCTION
GETTING OUT OF A SLUMP
TRADING COACHES
MODELING OTHERS
GROWING HAPPIER
NEUROFEEDBACK
MAINTAIN “LEARNING GOALS”
CHAPTER 23 - Behavioral Finance Investing
HARVESTING RISK PREMIA
RISK PREMIA AND EXPECTATIONS
VALUE VERSUS GLAMOUR
MOMENTUM, SIZE, AND THE OPTIMAL PORTFOLIO
“BUY ON THE RUMOR AND SELL ON THE NEWS”
LIMITS TO ARBITRAGE
BEHAVIORAL FINANCE FUND PERFORMANCE
BEHAVIORAL INVESTMENT PRODUCTS
FINAL NOTES
Notes
Glossary
Index
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