Readings: Trader Psychometrics, Un-learning, Investing biases
- Brett Steenbarger: Assessing Trader Personality: The Role of Trader Psychometrics
. . . personality traits - including overconfidence and sensation-seeking - are significantly associated with trading results. This corresponds to my own, more informal, findings that high degrees of neuroticism, coupled with sensation-seeking and low conscientiousness, are associated with poor trading outcomes.
Trader psychometrics can reveal important dimensions of trader personality:
1) Frequency of Trading
2) Size of Positions Relative to Portfolio Size
3) Average Size of Losing Trades vs. Winning Trades
4) Number of Different Positions and Strategies Employed
- TraderPsychology: Can we unlearn?
So if we can’t “unlearn” something, what can we do? Well, the process entails learning new behaviors and replacing our old, destructive habits with these new behaviors. Addictions persist because the associated memories and behaviors persist.
- James Montier: Prophet Among Pinstripes (somewhat dated)
Five laws about investing bias, evolution, and true happiness.
1. Leaving the trees could have been our first mistake. Our minds are suited to solving problems related to our survival rather than being optimized for investment decisions.
2. Why does meeting companies hold such an important place in the investment process of many fund managers? Because we need to fill our time with something that makes us look busy.
3. Our minds are not supercomputers and not even good filing cabinets. They bear more resemblance to Post-it Notes that have been thrown into a bin and covered in coffee. The ease with which we can recall information is likely to be influenced by the impact that information made when it went in.
4. Don’t equate happiness with money. Materialistic pursuits are not a path to sustainable happiness.
5. People adapt to income shifts relatively quickly; the long-lasting benefits are essentially zero.
Good stuff! I’m psyched 
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