People and the Psychology of Pension Fund Decisions

August Baker, Dennis E. Logue and Jack S. Rader

in Managing Pension and Retirement Plans

Published in print November 2004 | ISBN: 9780195165906
Published online July 2005 | e-ISBN: 9780199835508 | DOI:
 People and the Psychology of Pension Fund Decisions

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Pension fund decision makers must make complex decisions — decisions that are made in a such way that maximizes a sound objective function (such as maximizing the probability that promised benefits will materialize), and which should be based on information that is as complete as possible and processed correctly. This chapter discusses what the field of behavioral finance says about the decision-making process, the potential pitfalls in that process, and the potential systematic mistakes and methods for avoiding them. Decision makers who are aware of the psychology of investing should be able to improve performance by avoiding mistakes and exploiting the mistakes of others.

Keywords: behavioral finance; decision making; pension plans; psychology; active management

Chapter.  5484 words. 

Subjects: Financial Markets

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