A good piece with applications at all levels of trading.
“It infuriates me to be wrong, when I know I am right.” (Moliere)
In a previous job, I worked for an investment consultant who employed a psychologist to assist in their fund manager research process. I vividly recall her making a particularly astute point about how we constantly hear about the failings of active fund managers, but rarely anything about how they can improve. Whilst inevitably there are exceptions to this view, it is certainly reasonable to suggest that evidence of fund manager learning and development is scant. I do not mean that there is a lack of generic, box ticking courses with no specific purpose, rather an apparent absence of weaknesses being openly identified and addressed.
This may seem odd as active management should be a ripe environment for constant improvement – the difficulty level is high, there is continual feedback (though not necessarily the right sort) and sufficient latitude in the role to change behaviours. There is, however, a major problem; a key aspect of learning is the ability to identify areas of limitation and, in particular, admit mistakes. This is something that fund managers are typically not very good at. Although it is unfair to imply that the profession is unique in this regard – it is a constant struggle for us all – the environment in which a fund manager operates makes it particularly difficult to be open about failings, and therefore seek remedies.
More here – Behavioural Investment