In today’s episode we talk with London Business School professor Alex Edmans. He has spoken at Davos, testified in the UK House of Commons and reached millions through his TED Talks. He joins the show to discuss his new book, THE MADNESS OF MARKETS, WHY SMART INVESTORS MAKE CRAZY DECISIONS AND HOW TO EXPLOIT THEM. Alex explains why “mood matters” for markets and the surprising relationship of football results and music playlists to market movements. We discuss why individual investors sometimes have an advantage over professionals in taking advantage of psychological biases and go through practical ways this can be implemented.
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Episode TimeStamps:
00:00 - Introduction and Alex Edmans’ new book The Madness of Markets
02:46 - How football results can move stock markets
07:16 - What Spotify playlists can tell us about investor sentiment
11:28 - Why individual investors may have an advantage over professionals
16:26 - Specialists, generalists and finding your investing edge
21:59 - When benchmarks make active managers too conservative
26:18 - Risk, alpha and the equity premium puzzle
30:07 - Why momentum works and when it crashes
35:35 - Where individual investors can exploit overlooked opportunities
37:48 - How round numbers influence buying and selling decisions
39:54 - The disposition effect and why investors hold onto losers
44:12 - Three practical ways to make better investment decisions
47:20 - Why writing down your investment thesis matters
52:08 - Outsourcing the ugly decisions
55:30 - AI, bubbles and the big market delusion
58:00 - Closing thoughts and where to find the book
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