13. Behavioral Biases Avoided by Investing Quantitatively
One of the main reasons retail investors do not perform as well when directly trading stocks compared with index mutual funds is that their trading decisions suffer from behavioral biases. Behavioral biases are consistent biases that affect human decisions, impeding our ability to make wealth-maximizing decisions. This chapter enumerates some of these biases and discusses how they affect traditional, but not quantitative investing, and how quantitative investing avoids the negative effects of these biases.
The first three biases this chapter examines have to do with the way many people pick stocks. People read about something in the news, and that in turn leads to some research, which ...
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