Chapter 6 of Behavioral Finance and Investor Types by Michael M. Pompian is where it all comes together. After two chapters on personality theory and personality testing, Pompian finally introduces the thing the whole book is building toward: his Behavioral Investor Type (BIT) framework.
In Chapter 15, Larry Harris takes us away from the public exchange and into the “Upstairs Market.” If you want to buy 500,000 shares of a stock, you don’t just dump a market order into your app—you’d move the price 10% against yourself before the order was half-finished.
Chapter 5 is where Harris gets into the actual plumbing. You know how in previous chapters we talked about types of traders and types of orders? Now we are looking at the arena where all that happens. Market structure. The rules, the systems, and the “who gets to trade with whom” part.
Chapter 4 covered the history of personality theory. Now in Chapter 5 of Behavioral Finance and Investor Types, Michael Pompian moves to the practical side: how do you actually test for personality? Because having a theory is nice, but you need a way to measure it. And that’s what this chapter is about.
Previous: Chapter 2 Part 2
You survived your own ego in Chapter 2. Good job. But here’s the problem. Even if you fix your overconfidence, your environment can still ruin your investing decisions. Chapter 3 of Tim Richards’ book is all about situational finance. The idea that the world around you pushes you into decisions you think are your own.
Chapter 9 is where Travers shifts from talking about investment analysis to something most people overlook: the boring operational stuff that actually prevents you from losing all your money to fraud.
Chapter 4 of “Behavioral Finance for Private Banking” is short but it hits hard. It asks one simple question: what is actually happening inside your brain when you make money decisions?
So I just finished walking through all nine chapters of Richard Wilson’s “The Hedge Fund Book.” And here’s what I think after going through the whole thing.
In the second half of Chapter 14, Larry Harris gives us the “cheat sheet” for predicting how wide a bid/ask spread will be. If you’re building a trading system or managing a portfolio, these are the variables that determine your “slippage.”
Every time you tap “buy” in your brokerage app, you are sending an order. But most people have no idea there are many different kinds of orders, and each one has very different consequences for your wallet. Chapter 4 is basically a field guide to all of them.