What is behavioral economics and what does it have to do with investing?
Well, classical economics assumes all consumers are perfectly logical in their economic decisions. Behavioral Economics actually monitors and tests how people actually behave in their decisions. It was found we do not behave logically all the time and there are certain predictable ways we behave irrationally. In a sense Behavioral Economics is a blend of economics, psychology and neurobiology.
There are 2 fairly simple books with similar titles giving the basics of behavioral economics.
Why Smart People Make Big Money Mistakes by Gary Belsky and Thomas Gilovich is a basic treatise easily understood. If you want a bit more depth and more examples then try Investment Mistakes Even Smart People Make by Larry E. Swedroe. In this book over 70 common mistakes are listed and some tactics for recognizing and avoiding them are given.
I found both books interesting and gave me some ideas for improving my investment decision making.
If after reading one or both of these books you would like to delve into the topic more deeply let me know. I have some more book recommendations in this area of study. They do not all cover investing but have relevance to other parts of our economic lives as consumers, employees and business owners.

Russell Malley
StockCentral Community Leader