What can asset managers learn from Deep Blue's triumph at chess, or from Watson's victory at Jeopardy, or AlphaGo's win at Go, or from machine learning's success at language translation, or from the analysis of Google search terms to predict the spread of the flu? What do these examples from the rapidly evolving world of artificial intelligence teach us that is relevant for an analyst forecasting corporate earnings, or for an asset manager's strategy team deciding which new product to launch, or for their HR manager thinking about what skills to recruit for, or for a client engagement team seeking to influence prospective clients?
In a world of powerful algorithms and intelligent robots, of passive and factor-based strategies, what is the future role for humans in the investment management industry?
This book leverages unique insights into the strengths and weaknesses of professional investment decision-making that have been gained from the author's role as a specialist behavioural finance consultant and trainer. By combining concepts from behavioural finance and artificial intelligence this book identifies ways investment professionals can create "cyborgs" decision-making processes that integrate individual, team and machine thinking. When designed appropriately, cyborgs can perform better than humans or machines alone. With cyborg decision-making, improved risk-adjusted returns, greater client engagement, and more sustainable value propositions are possible.
Insights from behavioural finance are increasingly finding their way into mainstream financial media and the consciousness of regular investors. However, often what is presented is vague and un-actionable, and designed for an unsophisticated audience.
We are all human. Behavioural biases apply to professional investors too, sometimes more so, but not necessarily in the obvious ways we often read about. They impact the way super funds choose asset managers, how asset managers forecast company earnings, how advisers engage with clients and the functioning of investment committees and trustee boards.
This book is different. It brings together international research with the author’s unique experience as a behavioural finance specialist consultant to a diverse range of Australian professional investors, corporate decision-makers and advisers.
Behavioural insights are translated into 12 actionable strategies. Where possible, the financial impacts of each strategy are quantified. The consequences are often hidden but are nonetheless real. Billions of dollars of Australians’ retirement savings are at stake.