Behavioral Science: How We Talk and Think About It

In a conversation at a PIMCO event, Emmanuel Roman, Dan Ivascyn and Nobel Prize Winner Richard Thaler discussed the irrationality of human behavior and how investment managers can address biases in their processes.

More from this section

Read Transcript

MR. ROMAN: Okay. So we are going to sort of talk about how we think of the world. There is sort of two school; right? There is asset pricing, and asset pricing is important to us because that’s how we think about bonds and what’s cheap, what’s expensive, and then we have behavioral factors, and one of the question we have debated often, is how do we reconcile both of them, the behavioral school and the asset pricing school, and how can the two work together in terms of finding a way to explain what we see on there, and I always have this example about behavioral that momentum to me is a behavioral factor.

MR. THALER: Well, you know, so Gene Fama, who of course is the father of the efficient market hypothesis literally, his line is that "We agree about all of the facts, and we disagree about the interpretation," and I think that's mostly right, because if you look at the Fama-French research, they kept adding factors.

MR. ROMAN: Yeah, because it wasn't quite working.

MR. THALER: And it was -- yeah, or it was -- it could be made better – momentum Gene has never liked because you can't possibly call that a risk factor. So he’s refused to put that in there.

MR. ROMAN: It worked for 120 years; right?


MR. ROMAN: Dan, we have a bias board at the IC, so describe it and, yeah.

MR. IVASCYN: Well, it’s probably the most complicated chart in the world, and I think that was part of the point. It’s in very fine print, and there it is up on the screen.

It’s really a reminder to everyone that’s walking into the room where we make investment decisions that there are a lot of issues to think about in the decision making process, and the goal isn’t to go through every one. It’s really to remind us all that these issues exist and that we require good structures to help combat these biases.

And the good news is it’s not without hope.

There is a positive angle here, and that is that given that so many members of the investment community tend to succumb to some of these inefficiencies in decision making, in theory there is hope for investment platforms that do our best to help control the biases, create good structures and make as a rationale set of decisions as possible. So that’s really what this is set out to accomplish, and hopefully it’s helping in a small, small way.

Filters: Reset All


Close Filters Dropdown
  • Tags


  • Category


    Economic and Market Commentary
    Investment Strategies
    Bond by Bond
    PIMCO Foundation
    View from the Investment Committee
  • Order By


    Most Recent
() filters applied

Multimedia Finder

Filter By:
  • Economic and Market Commentary
  • Investment Strategies
  • Bond by Bond
  • Viewpoints
  • Careers
  • Understanding Investing
  • View from the Investment Committee
  • A
  • B
  • C
  • D
  • F
  • G
  • H
  • I
  • K
  • L
  • M
  • N
  • P
  • R
  • S
  • T
  • W
Tina Adatia
Fixed Income Strategist
Olivia A. Albrecht
Head of ESG Business Strategy
Joshua Anderson
Head of Global ABS Portfolio Management
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
David L. Braun
Head of US Financial Institutions Portfolio Management
Nathaniel Brown
Erin Browne
Portfolio Manager, Multi-Asset Strategies
Libby Cantrill
Executive Office, Public Policy
Pramol Dhawan
Head of Emerging Markets Portfolio Management
Joachim Fels
Global Economic Advisor
David Fisher
Head of Traditional Product Strategies
Adam Gubner
Portfolio Manager, Distressed Debt
Mary Hoppe
Daniel H. Hyman
Head of Agency MBS Portfolio Management
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Christine Long
Scott A. Mather
CIO U.S. Core Strategies
Mohit Mittal
Portfolio Manager, Liability Driven Investment and Credit
James Moore
John Nersesian
Head of Advisor Education
Sonali Pier
Portfolio Manager, Multi-Sector Credit
Libby Rodney
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Client Solutions & Analytics
Jerome M. Schneider
Head of Short-Term Portfolio Management
Marc P. Seidner
CIO Non-traditional Strategies
Sapna Shah
Head of Corporate Responsibility
Greg E. Sharenow
Portfolio Manager, Real Assets
Anmol Sinha
Fixed Income Strategist
Cathy Stahl
Global Head of Marketing
Christian Stracke
Global Head of Credit Research
John Studzinski
Vice Chairman
Geraldine Sundstrom
Portfolio Manager, Asset Allocation
Richard Thaler
Distinguished Service Professor of Economics and Behavioral Science at the University of Chicago's Booth School of Business
Jessica K. Tom
Senior Credit Analyst
Jamie Weinstein
Portfolio Manager, Head of Corporate Special Situations
Tiffany Wilding
North American Economist
Andrew T. Wittkop
Portfolio Manager, Treasuries, Agencies, Rates
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All

Straight from PIMCO: The Impact of TALF on Structured Credit

Straight from PIMCO: The Impact of TALF on Structured Credit

Josh Anderson, head of Global ABS Portfolio Management, discusses the benefits and limitations of the U.S. government’s latest Term Asset-Backed Securities Loan Facility (TALF) for structured credit markets, and where PIMCO sees opportunities ahead.


Economic and Market Commentary

PIMCO’s Process in Times of Crisis

PIMCO’s Process in Times of Crisis

During periods of volatility, our disciplined investment process becomes even more centralized and coordinated, leveraging multiple checks and balances to ensure that we are laser focused on our one priority: working to protect our clients’ capital.

Load more results Load {{cCtrl.fetchResults}} more results