Tapping into behavioral biases can create repeatable returns
Classical economics assumes the existence of a group of perfectly rational human beings who carefully weigh up the pros and cons of any financial decision. But these mythical beings have been hard to find in real life. In truth, people take sometimes irrational short cuts to help them make financial choices. This realization has led to the development of alternative theories aimed at identifying these short cuts or ‘heuristics’ – speedy ways of solving difficult problems.