● The Madness of Markets: Why Smart Investors Make Crazy Decisions–and How to Exploit Them
Alex Edmans
Review via Publishers Weekly
“Sometimes, the most rational thing a researcher can do is study the irrational,” contends London Business School finance professor Edmans (May Contain Lies) in this enlightening exploration of the psychological forces that drive financial market decisions. Edmans notes that even Isaac Newton fell victim to stock market frenzy, losing millions of pounds in a 1720 foray into South American ventures and lamenting that he could “calculate the movement of the stars, but not the madness of men.” Edmans offers examples of such madness, explaining how the weather, celebrity hype, and even the performance of a country’s soccer team skew investor behavior. Sometimes market decisions seem sound but are based on irrational biases, he adds.