In Part 1 we covered the theory behind onsite interviews. Now Travers takes us inside the actual visit to Fictional Capital Management. This is where we get to see how all those interview techniques play out in a real (well, fictional but realistic) setting.
In Part 1 we talked about overconfidence, loss aversion, and the disposition effect. Now let’s keep going with the rest of Chapter 2. This part gets into emotions, Black Swans, mental accounting, and some practical ideas on how to not sabotage yourself.
Chapter 4 of Behavioral Finance and Investor Types by Michael M. Pompian takes a step back from finance entirely. Instead, it walks through the history of personality theory. Why? Because before you can classify investor types, you need to understand how psychologists figured out personality types in the first place.
In Chapter 14, we look at the Bid/Ask Spread. This is the most important number in trading because it’s the price you pay for Immediacy. If you want to trade right now, you pay the spread. If you’re willing to wait, you try to earn the spread.
In Part 1 we covered the players: buy side, sell side, brokers, dealers. Now Harris walks us through what they actually trade, where they trade it, and who makes sure nobody burns the whole thing down.
This is a retelling of Chapter 2 (second half) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).
Chapter 9 of “The Hedge Fund Book” by Richard C. Wilson is basically one giant FAQ section. Wilson says his company gets over 150,000 emails a year, and a huge chunk of them ask the same questions over and over. So he put together the most common ones with answers. Smart move.
Chapter 2 of Tim Richards’ book is called “Self-Image and Self-Worth.” And the title tells you everything. This chapter is about how your ego quietly destroys your investment returns.
You have done the phone calls, crunched the numbers, analyzed the portfolio. Now it is time to actually show up at the hedge fund’s office and talk to people face to face.
Chapter 3 of Behavioral Finance and Investor Types by Michael M. Pompian is where the real meat starts. This is the catalog of all the ways your brain sabotages your investing. Pompian calls them “the building blocks” and splits them into two big groups: cognitive biases and emotional biases.