Meir Statman, Ph.D. | Arcadia Wealth Management

Investment Risk, Investor Risk Tolerance and Behavioral Goals-Based Portfolios

Consider your answer to the following question: “Suppose you are given an opportunity to replace your current investment portfolio with a new portfolio. The new portfolio has a 50-50 chance to increase by 50% your standard of living during your lifetime. However, the new portfolio also has a 50-50 chance to decrease your standard of […]

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International Stocks and Recency Bias

Blog / Meir Statman, Ph.D.

International Stocks vs. U.S. Stocks International stocks have not done well recently compared with U.S. stocks. The 2024 return of international stocks (as measured by the MSCI World ex USA Index) was just under 5%, lagging by nearly 20 percentage points the return of U.S. stocks (as measured by the MSCI USA Index). And the

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Filial Loyalty: What Adult Children Do for Their Elderly Parents

Blog / Meir Statman, Ph.D.

Culture in the U.S. is described as individualistic, whereas it is described as collectivistic in China. Psychologist Geert Hofstede defines individualism as “a preference for a loosely-knit social framework in which individuals are expected to take care of only themselves and their immediate families.” He defines collectivism, its opposite, as “a preference for a tightly-knit

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Explore the distinctions among experienced, evaluative and meaning well-being. How do income levels influence these aspects of life well-being and why might some people value one more than another?

Understanding the Three Dimensions of Life Well-Being & How Income Affects Them

Blog / Meir Statman, Ph.D.

Think about your answer to the following question: “Please imagine a ladder, with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you, and the bottom of the ladder represents the worst possible life for you. On which step of the

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Unlocking Life Well-Being: Insights from the Third Generation of Behavioral Finance

Blog / Meir Statman, Ph.D.

Many years ago, a financial adviser told me about a couple, prospective clients, who said, “Before you start planning for us, you should know that we have a disabled son. We need to plan for him first so he is supported even when we’re gone.” I often note that the biggest risks in life are

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The Magnificent Seven, Diversification and Long-Term Success

Diversification vs. Concentration in the Era of the ‘Magnificent Seven’

Blog / Meir Statman, Ph.D.

At the end of 2022, “The Magnificent Seven” was no more than the title of a 1960 American Western starring Yul Brynner and Steve McQueen. By the end of 2023, however, the “Magnificent Seven” turned into the name of a group of seven stocks that contributed more than two-thirds of the S&P 500® Index’s return

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Learn how overconfidence can impact clients' financial decision-making and how you can guide them toward better investment decisions.

The Pitfalls (and Benefits) of Overconfidence

Blog / Meir Statman, Ph.D.

Imagine that you are at an interview for your dream job. The interviewer says, “I have 100 applicants for this job. Tell me why I should choose you.” You are an appropriately confident person, not an overconfident one. So, you say: “Honestly, I don’t know. I don’t know the qualifications of the other 99 applicants

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The Unheralded Contributions of Markowitz to Behavioral Portfolio Theory

Blog / Meir Statman, Ph.D.

“I split my contributions 50/50 between bonds and equities,” Harry Markowitz said in a famous 1998 interview with Jason Zweig.1 Markowitz readily admitted that he did not compute co-variances and draw a mean-variance efficient frontier. “Instead, I visualized my grief if the stock market went way up, and I wasn’t in it —or if it

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Overcoming the money illusion trap can help your clients make more informed decisions.

Tripped Up by the ‘Money Illusion’

Blog / Meir Statman, Ph.D.

In a 1974 episode of the TV sitcom “All in the Family,” Archie Bunker gleefully tells his wife Edith, daughter Gloria and son-in-law Michael about his union’s labor settlement in a time of high inflation. Edith: “Archie, did you get a good raise?” Archie: “Edith, a three-year contract with 15%.” Michael: “Arch, what about the

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The Herd Mentality That Drives Bank Runs

Blog, Uncategorized / Meir Statman, Ph.D.

We unpack Silicon Valley Bank’s descent to insolvency and federal officials’ decision to extend deposit insurance to depositors whose accounts exceeded FDIC’s general limit of $250,000.

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