Behavioral pitfalls

Definitions of Statistical Terms

 * Standard Deviation
 * Skewness
 * Kurtosis
 * Tail Risk

Mental accounting
Mental accounting refers to a behavior that an investor treats a part of his money differently.

For example, if an investor gets a tax return from the IRS, he might spend it as if it were some found money even though the amount was an interest-free loan to the IRS.

As another example, an investor who inherits individual stocks from a close relative may have emotional attachment to those stocks even though he may be able to improve the risk adjusted return of his portfolio by selling the stocks and diversifying the proceeds.

Paralysis by analysis
Paralysis by analysis refers to a behavior that an investor doesn't do anything because he is overwhelmed with information.

For example, an investor may wonder whether he should go with Traditional IRA or Roth IRA. He might wonder forever and eventually end up not contributing at all to either account.

Articles

 * What Risk Matters, Robert Arnott, Financial Analysts Journal, (2003)
 * Bubble Logic: Or, How to Learn to Stop Worrying and Love the Bull by Clifford S. Asness, 08/2000
 * Rubble Logic: What Did We Learn from the Great Stock Market Bubble? by Clifford S. Asness, 2005
 * For Long-Term Investors, the Focus Should Be on Risk by Zvi Bodie and Paula H. Hogan, 06/2005
 * Risk and Risk Control in an Era of Confidence (or is it Greed?) by John Bogle, 04/06/2000
 * How Unusual Was the Stock Market of 2008? by Eugene F. Fama and Kenneth R. French, 05/04/2009
 * The Stockholm Syndrome and the Market by Todd Hickman, 07/22/2003
 * The Psychology of Successful Investing by Paul Merriman, 02/10/2005
 * Risk: What Exactly Is It? by Larry Swedroe, 08/08/2003

Institutional Research

 * Full Report: The Enviable Dilemma: Hold, Sell, or Hedge Highly Concentrated Stock? by Alliance Bernstein
 * Investment Solutions and Alternatives for Addressing Concentrated Equity by Vanguard Investment Counseling & Research, Donald G. Bennyhoff, CFA

Academic Papers

 * Psychological biases of investors by H. Kent Baker and John R. Nofsinger, 04/15/2002
 * The Courage of Misguided Convictions by Brad M. Barber and Terrance Odean, 12/1999
 * A Survey of Behavioral Finance by Barberis, Nicholas and Thaler, Richard H., (September 2002)
 * The Enviable Dilemma: Hold, Sell, or Hedge Highly Concentrated Stock? by Boyle, Patrick S., Daniel J. Loewy, Jonathan A. Reiss, and Robert A. Weiss. 2004.
 * Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk by John Y. Campbell & Martin Lettau & Burton G. Malkiel & Yexiao Xu. 2000
 * The Uncertain Science of Asset Allocation by Cotton, Benjamin L, (1999)
 * Asset Allocation in a Value-at-Risk Framework by Huisman, Ronald, Koedijk, Kees C.G. and Campbell, Rachel A.J. (April 27, 1999)
 * The Role of Company Stock in Defined Contribution Plans by Mitchell, Olivia S. and Utkus, Stephen P. (October 2002)
 * Seven Sins of Fund Management by James Montier, 11/18/2005