Without eyebrows threequarters of them were answered in the affirmative

Most quantitative managers, Goldman Sachs Asset Management, did not draw a line under "human" and psychology, while instead. He recruited the year past Kent Daniel, one of the experts of the so-called behavioural finance, to integrate the inputs in the model he developed internally. This line of research, called "behavioral finance", that is out of the laboratories of the University for investment management companies (read below), analyzes the psychology of investors and how it affects their expectations, behaviors and attitudes to risk. What challenges the assumptions of efficient markets and totally rational investors.

"For a long time, we are confident that, as a Manager, we can take advantage of the biases of behaviours of all investors (aversion to losses, gregarious behavior...), explains Michael Hughes, product specialist European equities at JP Morgan Asset Management." In 1993, we have launched in Britain a fund whose investment process was based on assumptions and lessons from behavioral finance. Its success and her performance we were encouraged to create other funds with the same approach. "Review: at JP Morgan AM, today, a little less than 100 funds are managed in this form, representing $ 42 billion. Their customers "In the majority of institutional investors", said Michael Hughes.

Some managers believe thus can operate successfully bias and through to the first rank of which overconfidence (read below).

Consultation of 300 managers

Thus, James Montier, of Dresdner Kleinwort Wasserstein, he recently asked 300 managers of all nationalities if they considered themselves above average (2). Without eyebrows, three-quarters of them were answered in the affirmative. The degree of optimism is the same, regardless of the nationality of surveyed professionals. They are also subject to multiple biases in reasoning: tend to look the most relevant information, not those that support their own opinion, or even of elements without any link with the purpose of their research.

Herd behaviour, particularly among younger managers, tend to be more optimistic about the evolution of values or the market in its own country are other commonly encountered through. They "are not a species to share and demonstrate behaviours biased like everyone, for example having a same aversion to losses", said James Montier. Some responses reflected "a lack of understanding of the risk, which is rather embarrassing for a management industry meant to be vaguely aware of this concept.

Indeed, this irrationality can cost dear to the customers in terms of underperformance and lack to win. Also some companies, such as Inalytics, specialized in the analysis of the costs of transaction managers, interested in how their personality and their psychology affect their investment decisions and therefore their performance. It observes that, in General, managers are good best buyers than sellers.

Variable focus

It is mostly the values very "unduly" in their portfolio (their weight is much higher than the weight they have in the index of reference of the Fund) which contribute most to its performance, both in frequency only in amount: of the order of 3 basis points a month for the sample of 41 funds actions analyzed in 2004, for a contribution this negative time, basis for the very "underweighted values 2 points.

The reason A manager who decides to "surpondérer" title will become very attentive to anything the near or far, while his attention will be less strong on an action that he decided to sous-pondérer. This attention difference between the values will have implications on the performance of its portfolio with generally less than bad surprise titles that have a high portfolio weight. This upward bias or purchaser of the managers explained that when they leave the world of traditional management to a Fund for said arbitration "long/short" (which can buy and sell short securities), success is not always to the appointment, far from it: the expertise in the management of short selling failed them badly.