Behavioral finance expert Prof. Meir Statman at Borsa İstanbul

Prof. Meir Statman, author of numerous articles and research studies on behavioral finance, delivered a presentation for financial sector professionals at Borsa İstanbul in a seminar entitled “What Investors Really Want: Lessons from Behavioral Finance”, organized by Borsa İstanbul Research Unit

Borsa İstanbul Research Unit hosted Prof. Meir Statman, a leading expert on behavioral finance, in the first event of the year. Prof. Statman delivered a presentation on behavioral finance to experienced researchers and sector professionals at Borsa İstanbul Conference Hall.

“Sector professionals must be aware of the desires, aims, cognitive weaknesses, and emotions of the investors, who are their clients. And at the same time, they must offer them scientific information”

Prof. Statman said that financial gain is not the only determinant on individuals’ spending and investment decisions, and the desire to express oneself and emotional benefit also play a role in such decisions. Prof. Statman added, “People care about aesthetic values, status and prestige no less than they do financial gain. Consumption decisions are made in consideration of these factors. The same is true for finance.  The target is to make money: but what for? In order to gain high yields, to make a living for the family, to get rid of the fear of poverty, to enjoy the hope of becoming rich, or to play and win the game of beating the market.

The first lesson to be drawn here is that investors must know themselves well. Financial sector professionals also need to know the desires, aims, cognitive weaknesses, and emotions of the investors. And the second lesson is that financial sector professionals must advise scientific information on the financial markets and human behavior to their clients as much as possible. The main factor that distinguishes a professional investor from an individual investor is scientific information. Science tells individuals what is true and what is false. While making investments, one should follow a well-controlled, strenuous, and well-defined path instead of a fast and easy one”.

In his presentation, Statman also questioned the assumptions of standard finance and talked about the pillars of behavioral finance, saying, “Investors are not rational, they are just normal. They manage their portfolios under the influence of various cognitive weaknesses rather than the standard portfolio theory framework. Efficiency of the markets is limited. Expected yields are not determined by risk only”.  Prof. Statman cited extreme self-confidence, viewing the developments in the market through a single perspective, considering only the events that verify our ideas, and following others instead of one’s own ideas  as wide-spread behavioral weaknesses.

Statman on what investors really want

Prof. Meir Statman of Santa Clara University studies on behavioral finance. Author of the award-winning book entitled “What Investors Really Want?” Meir Statman focuses on the decisions of investors and company executives, and how these decisions are reflected in the financial markets. Prof. Statman sits in the editorial boards of numerous journals, and is a leading academician on behavioral finance. Prof. Statman published numerous articles in the leading finance journals of the world, including Journal of Finance, Journal of Financial Economics, Review of Financial Studies and Journal of Financial and Quantitative Analysis. Prof. Statman was named as one of the 25 most influential persons of the world by Investment Advisor in 2011, and won several awards.