Time to ride the rally? Bearish brain meets bull market

One of the most interesting trends of the last decade is the rise of behavioural psychology. Behavioural finance – one of its sub-disciplines – has risen out of the debris of statistical investment modelling, which performed so poorly at the time of the Global Financial Crisis (GFC). Critics of the statistical approach (which is also known as Modern Portfolio Theory) have pointed out that risks can be underestimated if they have never occurred before and thus are not in the data – such as the sub-prime mortgage security meltdown.

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