How to seem educated and up-to-date in finance: 6 celebrated authors you should know
From Kahneman to Soros: discover your sources of finance wisdom
The majority of latest Nobel Prizes in Economics go for behavioural economics and finance
Finance goes hand in hand not only with politics and sociology ‒ always factor them in
A consensus has been reached that markets are not efficient, but where do we go from here? Start with Shiller's theory on narratives and work your way from there
You’ve accidentally found yourself chatting with that investor you’ve been trying to approach for months or with the person who works in the company you’ve had your eyes on for ages. It’s your time to shine and impress them. Unfortunately, you’ve spent more time in the field than with your nose in the books and now you’ve found yourself in a rut.
Don’t worry, we’ve gathered the intellectual survival kit for these situations. Even if you’re not facing pressing deadlines to improve your fluency in popular finance and economics, the authors below are a valuable source to examine at every point.
Daniel Kahneman
The 2002 Nobel Prize laureate in economics, Kahneman together with Amos Tversky shed light on the psychology of judgement and decision-making, as well as behavioural economics. Kahneman enables us to have a more profound understanding of the forces that have been governing the world of finance.
He received the prize for his findings on Prospect Theory and Anchoring Bias. Prospect theory, also known as the “loss-aversion” theory, assumes that losses and gains are valued differently, and thus individuals make decisions based on perceived gains instead of perceived losses. In other words, if two equal choices are put before an individual, with one presented in terms of potential gains and the other in terms of possible losses, the former option will be chosen. Read Kahneman’s book Thinking Fast and Slow to get an in-depth understanding.
Robert J. Shiller
Another starchild of the behavioural economics clan is Robert J. Shiller who received the Nobel Prize in economics for his work on the analysis of asset prices. Shiller finds that the most significant market anomaly that efficient market theory fails to explain is excess volatility. If most of the volatility in the stock market is unexplained, then the efficient market theory can be easily challenged. It says that asset prices can be forecast using the present discounted value of future returns. However, excess volatility renders these forecasts vague and inaccurate.
In his book Narrative Economics: How Stories Go Viral and Drive Major Economic Events, the author expands on the influence of stories as the driving force in between price shifts.
Benjamin Graham
The author of the canonical work The Intelligent Investor, by Benjamin Graham has, simultaneously, destroyed and created the collective intuition behind investing. “The Intelligent Investor” has become a must-have in any person’s library. The book was first published in 1949, and the latest edition of the book includes updates and links with contemporary updates from financial journalist Jason Zweig. Still, Graham’s notes on a multitude of topics, most importantly on value investing, loss minimisation and resistance to emotional decision-making, continue shaping our understanding of finance. This classic read has sold more than a million copies worldwide.
George Soros
Less of an author – more of a legend – the name George Soros lays on the tongues of all those intoxicated from the goldrush of financial gains. George Soros gained his recognition as “The Man Who Broke the Bank of England” because of his short sale of US$10 billion worth of pounds sterling. That’s how Soros profited by $1 billion on the 1992 Black Wednesday.
George Soros was born in Budapest, Hungary on 12 August 1930. He survived the occupation and left for England in 1947. While a student at the London School of Economics, Soros became familiar with the work of the philosopher Karl Popper, who had a profound influence on his thinking and later on ‒ his professional and philanthropic activities. In 1956 he moved to the United States, where he began to accumulate a large fortune through his international investment fund. The Alchemy of Finance by George Soros lays out his experience and gives a behind-the-scenes look at the legendary events.
Steven D. Levitt and Stephen J. Dubner
Steven D. Levitt and Stephen J. Dubner are authors of the #1 Bestseller Freakonomics. In Freakonomics, the authors unpack how people respond to incentives. To that end, they investigate seemingly non-economic subjects, such as how parents pick names for their children and even how the legalisation of abortion could be responsible for a drop in crime. “Freakonomics” broadens your perspective on the spill-over effects of economics on politics, finance and the society at large.
