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“Taking a psychological approach to financial markets is relatively new. Not all schools have classes that are tailored to it. Students have learned that strong emotions and judgment biases affect behavior in financial markets.”
 
Vital Statistics
Name: David Hirshleifer, Professor/Finance and Merage Chair in Business Growth
Degree: PhD, University of Chicago
Areas of Expertise and Research Interests:
  • Psychology and markets
  • Investments
  • Corporate finance
  • Risk management and determinants of futures prices
  • Information, social interactions and the stock market
 
When My Students Learn, I Learn

One thing that I have learned from students in my Behavioral Science class is that trading can be quite stressful, especially after losses. I have my students participate in decision problems so that they can see what psychological bias means in action. I also try to stimulate discussion about how feelings and judgment biases have affected stock prices and managerial decisions, sometimes dramatically. Going through this process gives us all an opportunity to learn about how psychological forces drive markets and organizations.


I ask my students to think about questions such as, "Is the market efficient?," "How does psychology affect it?," and "How do I know whether my analysis is better than that of other investors?" It's exciting to build a map of the pitfalls and the opportunities inefficient markets present, and to learn about ways to exploit opportunities while minimizing risk. Our students can explore the new markets for speculation and risk-sharing, and perhaps carve out a niche for themselves in this expanding area."

 

 
 

True strategic innovation goes beyond microtactics and steps back to see if there is something big and important that is being missed."

  Innovation Goes Beyond Microtactics

Real-world financial markets change rapidly. New strategic innovations create vast opportunities for value creation. True strategic innovation goes beyond microtactics and steps back to see if there is something big and important that is being missed. It’s thinking big picture and bringing about change in the way people do things.
 
Leaders Help Innovate

Strong leaders should be thoughtful. They should identify two to three things that are threats or opportunities that an organization needs to focus on. They must also be good listeners. This helps a leader come up with specific and practical goals. Also, a good leader should be able to present these goals to the team in a way that's vivid and memorable. Clarity of goals positions the team to innovate successfully.
 
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