The Papers that Changed Investing: Prospect Theory

It's 1979. Finance has a comfortable certainty: investors are rational creatures who calculate risk, weigh probabilities, and choose whatever maximizes their utility.

But here's the problem: real investors don't behave that way. They may panic. They may cling to losers. They could obsess over short-term losses while ignoring long-term gains.

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DISCLOSURES:

This video is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results.

The discussion of Daniel Kahneman, Amos Tversky, and Prospect Theory is intended to illustrate behavioral finance concepts and does not imply any endorsement of Index Fund Advisors, Inc. or its services.

Index Fund Advisors, Inc. is a registered investment adviser. Additional information is available by reviewing IFA's ADV Brochure at https://www.adviserinfo.sec.gov/ or visiting www.ifa.com.