Behavioral Finance

Bad Habits and Good Practices (Supplement)

Topics - Behavioral Finance Asset Allocation

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Bad Habits and Good Practices (Supplement)

Major pension funds and institutional investors have been increasingly vocal in their support of maintaining a long-term investment horizon, but this research shows that they need to be “good investors” in order to achieve optimal risk-adjusted returns over the long term. Investors don’t necessarily recognize that they need to overcome behavioral biases that may lead them to succumb to bad habits like multi-year return chasing, under-diversification and comfort seeking, says Antti Ilmanen, Principal at AQR Capital Management in London.

“We need to make investors behave better mainly for themselves bu t also for us (as managers),” adds Ilmanen, speaking about his article, Bad Habits and Good Practices, in The Journal of Portfolio Management. Ilmanen is co-author with David Kabiller, Founding Principal of AQR Capital Management in Greenwich, CT, and Amit Goyal, Professor at the University of Lausanne in Switzerland.

Bad Habits and Good Practices (Supplement)

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