Conventional wisdom, meaning Modern Portfolio Theory (MPT) and Capital Asset Pricing Model (CAPM), assumes that markets are typically efficient and people generally act rational. However, the real-world has shown time and time again this is simply not the case. After all, why do stock market bubbles occur? Why do automated investing strategies fail? And why have so many value investors been successful? By the end of this lecture, you'll understand why emotions are integral to investing and how to identify and avoid potential traps and biases.

Talking Points:

• Behavioral finance attempts to explain why emotion leads us in the wrong direction
• Prospect theory reveals the inner workings of investors
• How to identify and avoid traps and biases
• Remaining businesslike with your approach is the best way to exclude emotional investing