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Behavioral Finance is a wide topic, which I believe is still today underestimated by many financial professionals. How can it be used by quants? Well, in portfolio optimization it can be used "as an overlay" in the form of constraints where the optimal portfolio can not be too different from the current portfolio, because clients have behavioral biases ...


3

The general effect of quantitative analysis of the markets is to enforce randomness. Suppose a strategic quant finds a predictable pattern where a stock always rises on Tuesdays. His institution will commence buying the stock every Monday, and selling on Tuesday. The trading itself pushes the stock price up on Monday and down on Tuesday (in general), so if ...


1

More measurable effects to add to your list: "window dressing" - returns of the fourth quarter or 12th month (i.e. year-end) are higher on average than oher returns; the same to returns of 4th months (qtr-end) vs. others; "herding": changes in asset-classes shares of "big" funds (whatever you define "big") granger-cause changes in asset-classes shares of ...



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