A Fast and Frugal Finance: Bridging Contemporary Behavioral Finance and Ecological Rationality

A Fast and Frugal Finance: Bridging Contemporary Behavioral Finance and Ecological Rationality adds psychological reality to classical financial reasoning. It shows how financial professionals can reach better and quicker decisions using the ‘fast and frugal’ framework for decision-making, adding dramatically to time and outcome efficiency, while also retaining accuracy. The book provides the reader with an adaptive toolbox of heuristic tools and classification systems to aid real-world decisions. Throughout, financial applications are presented alongside real-world examples to help readers solve established problems in finance, including stock buying and selling decisions, even in situations of considerable uncertainty and risk.

The book concludes by describing potential solutions to financial problems, including discussions on high frequency trading and machine learning algorithms.

Demonstrates how well-constructed ‘fast and frugal’ models can outperform standard models in time and outcome efficiencyFocuses on how financial decisions are made in reality rather than how they should be madeDiscusses how cognition and the decision-making context interact in producing ‘fast and frugal’ choicesExplores the development of decision-making trees in finance to aid in decision-making

Section I A Fast-and-Frugal Approach to Finance  1. Introduction 2. Fast-and-Frugal Heuristics 3. Adaptive or Efficient Financial Markets? 4. Financial Regulations and Heuristics 5. When Fast-and-Frugal Works Best

Section II Applications of Fast-and-Frugal Finance 6. Fast-and-Frugal Asset Pricing 7. Fast-and-Frugal Portfolio Theory 8. Fast-and-Frugal Financial Analysis 9. Inference Under the Law of Small Numbers: Earnings Streaks Rather Than Earning Numbers 10. A Fast-and-Frugal Finance