The irrational investor and behavioral finance
U.S. News & World Report - 07/22/2016
In terms of how investors approach portfolios, forms that analyze behavioral biases can help people make smart decisions before they trip themselves up, says Paul Bolster, a finance professor at Northeastern University’s D’Amore-McKim School of Business.
“Simple asset allocation models take the form of a questionnaire,” Bolster says. “Responses are weighted and aggregated into a score that’s in turn translated to an asset allocation. … Think of these models as having ballast. An investor can pull them toward an extreme position but the model will not encourage them to go all the way to the edge.”