Research and Insights Library

Behavioral Finance and Factor Investing

This video ties together “behavioral finance”—the study of investor psychology at work in the markets—and factor investing: Human behavior is as key to security pricing as mathematical models. Factor investing also draws on the three classic pricing elements from John Maynard Keynes: what the market thinks a price will be in the future, how much risk is discounted, and how investors are influenced by consensus thinking. Keynes and behavioral finance work together for the factor investor, just as growth and value factors are not oppositional but rather complementary.

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