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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