Will I love Finance for Normal People?

I recently finished Meir Statman’s newest book, which is grounded in what he considers his third generation of behavioral finance research. However, it is his brilliant second-generation work that I want to focus on in this review.

As one of the founding architects of behavioral finance, Statman does more than just point out market anomalies—he builds a cohesive, unified structure for the entire field. He outlines foundational blocks that are essential for any serious investor to understand: normal behavior, behavioral portfolio theory, behavioral life-cycle theory, behavioral asset pricing theory, and behavioral market efficiency.

What resonates most with me… show more.

Everyone makes mental shortcuts and also have biases. How can we learn to recognize errors in thinking when it comes to our money? How can we make better choices when it comes to saving or spending? Are we normal or irrational?

Behavioral finance began in the 1970s and I found Statman’s discussion fascinating on almost every page. He sums up these biases when applied to our financial choices as well as to the markets.

Normal people have wants and emotions. This contrasts with many books about how people are irrational. Indeed, we are more normal than irrational once we understand… show more.