• Suzanne Wooley | Bloomberg

How to Profit from Behavioral Economics


It’s easier to limit your own mistakes than to exploit everyone else’s.

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When people can’t understand what markets are doing, they often turn to psychological phenomena to try and explain it: Think of stock phrases such as “irrational exuberance,” “greed and fear,” and “climbing a wall of worry.” Even economists now widely accept that investors’ mental quirks mess with models of rational decision-making. On Oct. 9, the Nobel prize in economics went to a University of Chicago behavioral economist, Richard Thaler, for exploring the biases and cognitive shortcuts that affect how people absorb and process information.