Understanding Behavioral Economics: How to Beat the Market

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Understanding Behavioral Economics: How to Beat the Market

Jeff Henriksen is the Founder and CEO of Thorpe Abbotts Capital, a behavioral-focused hedge fund focused on exploiting systematic biases in public markets.

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Podcast: Understanding Behavioral Economics – How to Beat the Market

Jeff Henriksen is the Founder and CEO of Thorpe Abbotts Capital, a behavioral-focused hedge fund focused on exploiting systematic biases in public markets.

Key Highlights

[00:01 – 13:24] Behavioral Finance and the Stock Market

Human beings are influenced by biases and these can lead to mistakes in investment decisions
The efficient market hypothesis and why individual investors cannot outperform the market
Crowd wisdom on making accurate predictions based on the collective knowledge
How the measure of free cash flow and the discount rate of an evaluation are affected

[13:25 – 39:06] Beware of Systematic Investor Bias

The levels of happiness based on gains and losses relative to a reference point
Risk-seeking behavior has profound implications on markets and security prices
How revenues and debt levels do not become indicative of distress
Beware of value trap companies – looking promising but may be eroding rapidly

[39:07 – 41:29] The Importance of Disproving Your Own Views

Markets are a lot more efficient than a lot of active managers realize
Start out most investment thesis from a bearish perspective and disprove the bearish thesis
To not be overly optimistic that the market’s just throwing out great opportunities all the time

[41:30 – 42:57] Closing Segment

Email Jeff and check out his website.

Links Mentioned:

Website: https://thorpeabbottscapital.com

https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555 (Thinking, Fast and Slow by Daniel Kahneman)

Brian’s Linkedin: https://www.linkedin.com/in/brian-c-adams/

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