Nudging Your Way to a More Profitable Portfolio

Nobel Prize for Economics winner Richard Thaler is helping people overcome their behavioural biases

Dan Kemp 6 November, 2017 | 11:31AM
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Nobel prize winner Richard Thaler

Investment is a process of making decisions. In general, the higher the quality of those decisions, the better the long-term returns. However, investment decisions are often made under challenging circumstances with limited information and uncertain outcomes. Faced with such decision-making, most people portray predictable biases that can lower the quality of decisions made, leading to poor investment outcomes.

The existence of these biases stands in sharp contrast to the traditional view in economics that people make rational, profit-maximising decisions. This insight has led to an entirely new branch of economics called behavioural economics, the impact of which has been demonstrated by the award this month of the Nobel Prize for Economics to Richard Thaler, one of the leading lights of the movement.

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About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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