A Nobel Prize-Winning Theory Is Enriching a $7.5 Billion Manager
Human beings tend to have biases. Knowing how to read those can make you very rich.
During a recent interview in Oslo, Stacey Nutt, the chief executive officer of asset management firm ClariVest Asset Management LLC talked about the way behavioral economics is helping his portfolio managers beat the market. Nutt says the trick is to go for “under-appreciated fundamental trends.”
“Fundamental movement but not a lot of excitement. That’s an interesting combination for us,” he said in the Norwegian capital last week. “When there’s still, what I would call, a blanket of cynicism, that kind of resides over those trends.”
The notion that investors can beat the market has met with a good deal of skepticism of late. But some active managers are now trying to get ahead by applying behavioral finance theories such as those developed by Nobel laureates Richard Thaler (co-author of “Nudge”) and Daniel Kahneman. These asset managers try to avoid behavioral biases in their own decisions, while capitalizing on the biases of others.
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