Anyone already read this topic? I would be interested to have another point of view.
I did and I think it’s one of the worst topic (and also bad written by Schweser) I ever read in the CFA curriculum. In the three readings, i’s just a kind of repeating the same biases every time, mostly in a different (sometimes incoherently) way, and in the end I find really difficult to remember all these concepts.
I am a bit scared if all the CFA L3 requires this amount of memorizing…
I was personally not a fan of the readings myself either, but I feel it’s one of those sections that just sink over time (I’m hoping) as you get exposure to it through practice.
Working in a client facing portfolio management setting, I can attest that an understanding behavioral finance is extremely important and useful. Some days I’m more of a psychologist than anything else. Convincing a 90 year old widow that it might not be the most prudent decision to keep 50% of her portfolio in inherited valeant stock despite a strong emotional attachment. Or reasoning with someone to stop doubling down on a downward trending stock because of their framing bias. Sometimes it’s not enough to provide an answer rooted in traditional financial theory… Deeply seeded emotional tendencies often require a more tactful approach.
I completely agree about how redundant the text is though. It could all have been summed up in 1 chart.
it’s crazy difficult trying to distinguish some biases which are 99% identical with each other.
I second this - the text is very dry but as I work in a client facing PM role it comes in very handy.
Distinguishing between 2 nuanced biases should not make or break you on the actual exam if you’ve prepared well. That said, I agree that the CFA curriculum could be greatly improved here - pretty awesome topic that they don’t do justice.
Agreed. The candidate should however understand the main underlying concepts of each bias or cognitive error.