Académique Documents
Professionnel Documents
Culture Documents
MIT SLOAN
Investment Conference 2016
Presentation by
Barry Ritholtz,
Chairman & CIO
Ritholtz Wealth Management
Todays Discussion:
Neuro-Finance
Risk Aversion
1. Herding, Groupthink
1. Misunderstanding risk
2. Optimism Bias
2. Selective Perception/Retention
3. Confirmation Bias
3. Words vs Images
3. Black Swans
4. Expert Opinions
4. Pattern Recognition
5. Recency Effect
5. Data vs Narrative
6. Endowment Effect
6. Cognitive Dissonance
7. Hindsight Bias
8. Risk Aversion
Shark: A perfectly evolved killing machine, immortalized in Spielbergs 1975 film, Jaws.
Death by Selfie
1. An American woman fell to
her death while taking a selfie
with her boyfriend on a cliff in
South Africa.
2. Two Russian men were killed
while taking a selfie with a hand
grenade.
3. Three Indian students were
killed by an oncoming train
while taking selfies on train
tracks.
4. A Romanian teenager was
electrocuted when she was
taking a selfie on top of a train
and touched a high-voltage
wire.
5. A Russian teen was also
electrocuted after touching live
wires while taking a selfie near
railway tracks.
6. A Russian woman shot
herself in the head while trying
to take a selfie with a gun.
7. A woman in Moscow City
died falling from a bridge,
where she was trying to take a
selfie.
8. A teenager in Houston,
Texas, fatally shot himself while
taking a selfie with a gun.
9. A Japanese tourist died
falling down the stairs while
taking a selfie at the Taj Mahal.
Source: Ritholtz.com
Sentiment Cycle
Source: Ritholtz.com
Source: DALBAR
Risk of Terrorism
2010: U.S.
noncombatant
fatalities from
terrorism
worldwide = 25
2011: Terror
deaths = 8
Annual deaths
due to struck
by lightning =
29 .
Source: LA Times
You are
35,079 times more likely to die of heart disease
33,842 times more likely to die of cancer
than a terror attack.
Source: CDC
Market Crashes
HyperInflation
Collapse of the
Dollar
Looking foolish
Catastrophizing Markets
Faber on Hyperinflation: Not A Matter Of If But When Business Insider, 9/23/2010
'The Bear Market Is Starting' Marc Faber CNBC, August 3, 2011
Faber: The Dollar's Value In The Future Will Be Zero Business Insider, 4/18/ 2011
Marc Faber: We Could Experience A 1987-Style Crash This Year Business Insider,
5/10/2012
Marc Faber: Look out! A 1987-style crash is coming. CNBC, August 8, 2013
2014 crash will be worse than 1987's: Marc Faber CNBC, April 10, 2014
Dr. Doom calls bubble, adding to gloomy calls CNBC, Nov 2, 2015
My prediction? Sometime in 2016, Faber will predict a 1987-like crash . . .
-70%
Jan-26
Jan-28
Jan-30
Jan-32
Jan-34
Jan-36
Jan-38
Jan-40
Jan-42
Jan-44
Jan-46
Jan-48
Jan-50
Jan-52
Jan-54
Jan-56
Jan-58
Jan-60
Jan-62
Jan-64
Jan-66
Jan-68
Jan-70
Jan-72
Jan-74
Jan-76
Jan-78
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
Jan-16
Risk . . .
0%
-10%
-20%
-30%
-40%
-50%
-60%
-80%
-90%
$100,000
Jan-26
Feb-28
Mar-30
Apr-32
May-34
Jun-36
Jul-38
Aug-40
Sep-42
Oct-44
Nov-46
Jan-49
Feb-51
Mar-53
Apr-55
May-57
Jun-59
Jul-61
Aug-63
Sep-65
Oct-67
Nov-69
Jan-72
Feb-74
Mar-76
Apr-78
May-80
Jun-82
Jul-84
Aug-86
Sep-88
Oct-90
Nov-92
Jan-95
Feb-97
Mar-99
Apr-01
May-03
Jun-05
Jul-07
Aug-09
Sep-11
Oct-13
Nov-15
Reward !
$1,000,000
Growth of $100
$10,000
$1,000
$100
This
is
your
brain
Your brain weighs 3 pounds, and is 100,000 years old. It is a dynamic, opportunistic, self-organizing system of systems. MRIs have revealed to
Neurologists what our brains looks like when making decisions. We can observe it 1) in real time; 2) under actual conditions, and 3) in reaction to
financial risk/reward stimuli.
Once we begin trading stocks, however, our brains begin to undergo subtle physical change that we can actually see in the MRIs of Traders . . .
This
is
your
brain
on
stocks
Understand Risk:
a) Recognize its value;
b) Embrace appropriate levels;
c) Beware risk aversion.
Barry L. Ritholtz
Chairman,
Chief Investment Officer,
Ritholtz Wealth Management
90 Park Avenue, 18th floor
New York, NY 10016
212-455-9122
Info@RitholtzWealth.com