Winning against Wall Street's New Weapon Part I

If anyone wants to handle their own investing, I suggest they learn the term BEHAVIORAL FINANCE. It is also known as behavioral econ or quant trading or neuro investing. It has been around awhile but as Paul Farrell points in his article Weapons of Mass Manipulation

there is a new component to this study of investor behavior and the "irrationality" behind investor's buying, holding and selling.

The science of this had been "dominated by psychologists studying irrational human behavior" However, Farrell says the the field is now becoming dominated by mathematicians chiefly, "University of Chicago finance professor Richard Thaler."

In this article Farrell explains that "unlike the psychologists Thaler and the quant mathematicians are NOT interested in WHY investors are irrational" Instead they assume ". . . . financial markets and investors are irrational and always will be." [emphasis mine].

According to Farrell the quants-as he terms them-want to take advantage of investors' irrationality as the market goes through its up and down cycles, through use of "sophisticated quant math programs." Of course only those institutions and wealthy individuals with the resources can afford to implement these programs. And so most of us smaller investors are once again left out in the investment hinterlands.

Part II I look at "Lazy Portfolios" Farrell's solution to the game being rigged.

UPDATE: The link in this posting doesn't work so I reposted the posting with a working link.

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