This school of thought proposes that investors are not fully rational in their actions, but instead allow their decisions to be influenced by emotions that can be the source of behavioral biases. Much of the work in behavioral finance shows that people consistently make mistakes, even when they have been alerted to their tendency to do so.
At Robeco, our quantitative solutions seek to exploit these deeply entrenched biases through a disciplined, transparent and systematic approach that keeps emotions at bay and takes advantage of market inefficiencies driven by human behavior.
In this publication, we first look into how behavioral biases can affect investors and how quant investing can benefit from the resulting market inefficiencies by featuring the insights of our in-house experts: Chief Quant Strategist, Pim van Vliet; Chief Researcher, David Blitz; and Head of Factor Investing and Professor in Behavioral Finance at Erasmus University Rotterdam, Guido Baltussen.
We then explore why risk-based theories fail to adequately explain the existence of the low volatility, momentum, quality and value factors, and why behavioral biases actually give rise to them. Then, in closing, Remco Zwinkels, Professor of International Finance at Vrije Universiteit Amsterdam, touches on his work in the field of behavioral finance and shares some interesting anecdotes.
Discover the value of quant
Subscribe for cutting-edge quant strategies and insights.
Important information
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong. This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions. The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.