CFA Level III:Behavioral Finance
行为金融十二大问题
1、比较传统金融与行为金融在投资决策上的区别
2、比较utility theory 和Prospect theory 在投资决策上的区别
3、比较传统金融学与行为金融学（CS、BAP、BPT、APH）在资本市场与组合构造中的不同。
4、Cognitive errors(9)efinition, Consequence & Overcoming
5、Emotional bias(6)efinition, Consequence & Overcoming
6、如何Behaviorally ModifyAsset Allocation
7、三种投资者分类方法VS调查问卷分类法
8、行为金融如何影响顾问-客户关系？
9、行为金融如何影响投资组合构建？
10、行为金融如何影响投资分析？
11、行为金融如何影响集体讨论？
12、行为金融如何影响市场行为？
Overview
Reading The behavioral finance perspective
Reading The behavioral biases of individuals
Reading Behavioral finance and investment processes
1.1 Traditional finance vs. behavioralfinance
Within traditional finance, individuals are assumed to be risk‐averse,self-interested utility maximizers. (rational). Traditional finance furtherhypothesizes that, at the market level, prices incorporate and reflect allavailable and relevant information.
Behavioral finance includes behavioral economics, investorpsychology, behavioral science, experimental economics, and cognitivepsychology. The variety of approaches taken to examine investor behavior addsto the confusion about what is meant by behavioral finance.
–  Behavioral finance micro (BFMI) 个人examines behaviors or biases that distinguish individual investorsfrom the rational actors envisioned in neoclassical economic theory.
BFMI questions the perfect rationality and decision‐making processof individual investors
–  Behavioral finance macro (BFMA) 市场considers market anomalies that distinguish markets from theefficient markets of traditional
–  finance.
BFMA questions the efficiency of markets.
1.2 Decision‐making process
To provide a framework for understanding the implications of thedecision making process for financial market practitioners, we will use anapproach, developed by decision Theorist, Howard Raiffa.
He uses the terms normative analysis, descriptive analysis,prescriptive analysis.
–  Normative analysis（规范的） isconcerned with the rational solution to the problem at hand. It defines anideal that actual decisions should strive to approximate.
–  Descriptive analysis（叙述的） isconcerned with the manner in which real people actually make decisions.
–  Prescriptive analysis（指定的） isconcerned with practical advice and tools that might help people achieveresults more closely approximating those of normative analysis.
Traditional finance assumptions about behavior as normative.
Behavioral finance explanations of behaviors as descriptive.
Efforts to use behavioral finance in practice as prescriptive
2.1 Traditional finance perspectives on individualbehavior
Traditional finance concepts maybe thought of as normative,indicating how people and markets should behave.
Investors are assumed to be rational investors
–  make decisions consistent with utility theory
–  and revise expectations (update beliefs) consistent with Bayes'formula.
They are further assumed to be self‐interested and risk‐averse（CP loss averse）, to haveaccess to perfect information, and to process all available information in anunbiased way.
2.1.1 Utility Theory
To maximize utility, a rational investor will make decisionsconforming to the four axioms of utility: completeness, transitivity,independence, and continuity.
–  Completeness(完整性): Choicesand preferences are known.
The individual is aware of all available choices and can value andassign preferences to each, such that between any two choices, the individualprefers one over the other or is indifferent between them.
–  Transitivity（传递性）: Rankingsare applied consistently.
If the investor prefers choice X to choice Y and prefers choice Y tochoice Z, the investor will prefer choice X to choice Z.
Independence（独立性）: Utilitiesare additive and divisible.可加，分割
–  Adding choice Z to both X and Y will not affect the preferenceranking of X and Y. If, for example, the investor prefers X to Y and we add Zto both choices, the investor will prefer (X + Z) over (Y + Z).
–  Also, assuming the investor prefers X to Y, if any portion, p, of Zis added to X and Y, the investor's preference ranking does not change. Theinvestor will prefer (X + pZ) to (Y + pZ).
–  If the ranking is based on the size of the proportion, the choicesare not
–  independent.
Continuity（连续性）:Indifference curves are smooth and unbroken.
–  Assume there are three choices, L, M, and N, such that the investorprefers L to M and M to N. There must be a combination of L and N (portions aand b) that makes the investor indifferent between (aL + bN) and M.
–  This ensures that indifference curves are unbroken (i.e.,continuous).