Behavioural Issues in Portfolio Decision Analysis

Barbara Fasolo (), Alec Morton () and Detlof Winterfeldt ()
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Barbara Fasolo: London School of Economics and Political Science
Alec Morton: Management Science Group
Detlof Winterfeldt: International Institute for Applied Systems Analysis

Chapter Chapter 7 in Portfolio Decision Analysis, 2011, pp 149-165 from Springer

Abstract: Abstract The aim of this chapter is to review some behavioural issues in portfolio choice and resource allocation decisions, with a focus on their relevance to Portfolio Decision Analysis. We survey some of behavioural literature on the most common heuristics and biases that arise in and can interfere with resource allocation processes. The common idea behind this behavioural literature is that of cognitive or motivational failure as an explanation for the violation of normative models. Then, we reflect on the relevance of this literature by drawing from the authors’ personal experiences as decision maker or decision analyst in real world resource allocation settings. We argue that justifiability can also be a reason for the normative violations. We conclude by discussing ways in which an analyst might approach debiasing.

Keywords: Resource Allocation; Environmental Restoration; Resource Allocation Model; Equal Allocation; Individual Bias (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-1-4419-9943-6_7

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DOI: 10.1007/978-1-4419-9943-6_7

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