Senior issues forum: The Impact of Emotions on Investment Behavior

The Fairfield Senior Center will sponsor a talk, The Impact of Emotions on Investor Behavior, as part of its Senior Issues Forum series on Thursday, April 16, at 6 p.m., 100 Mona Terrace.

Free, but advance registration is required by calling 203-256-3166.

Ed Hynes, a financial advisor with Merrill Lynch, will be presenting how behavioral finance extends the analysis of emotions such as greed and fear, to the role of biases in decision making. He will also discuss how to use simple rules of thumb for making complex investment decisions.

Most people know that emotions affect investment decisions. According to Mr. Hynes, “People in the industry commonly talk about the role greed and fear play in driving stock markets. It takes the insights of psychological research and applies them to financial decision-making.”

Hynes will discuss the psychology of financial decision-making, for example: “Behavioral researchers have taken the view that finance theory should take account of observed human behavior. Research from psychology helps to develop an understanding of financial decision-making and create the discipline of behavioral finance. Behavioral finance is making a serious impact on the way people approach many decisions.”

According to Wikipedia: “ Behavioral economics and the related field, behavioral finance, study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation. Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory; in so doing, these behavioral models cover a range of concepts, methods, and fields. Behavioral economics is sometimes discussed as an alternative to neoclassical economics.

The study of behavioral economics includes how market decisions are made and the mechanisms that drive public choice. The use of “Behavioral economics” in U.S. scholarly papers has increased in the past few years as a recent study shows.

There are three prevalent themes in behavioral finances:

• Heuristics: People often make decisions based on approximate rules of thumb and not strict logic.

• Framing: The collection of anecdotes and stereotypes that make up the mental emotional filters individuals rely on to understand and respond to events.

• Market inefficiencies: These include mis-pricings and non-rational decision making.

Hynes has been a professional in the financial services industry for 30 years. Growing up in Wilton, CT, he graduated from George Washington University and spent most of his career in financial services as an equity analyst, institutional salesperson and trader. Ed presently works as a Financial Advisor with Merrill Lynch in Westport and lives in Norwalk.

Hynes is volunteering to present an informational and educational program only. He will not be discussing any particular financial instrument or strategy or giving financial advice; nor will any business be conducted before or after the program.

The Senior Center is handicapped accessible. There is free parking. To register for this free program, call 203-256-3166 Monday-Friday, 9-3:30.

The Center also maintains a Facebook Page, which includes timely information and scheduling of activities and programs.

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