James Montier Applies Behavioral Finance to Value Investing

James Montier

James Montier, a member of the asset allocation team at GMO UK Ltd., routinely challenges the market’s consensus with his white papers and research reports. As he writes in “What Goes Up Must Come Down!,” his March 2012 white paper for GMO, “the Wall Street consensus has a pretty good record of being completely and utterly wrong.” Montier points out the shortcomings of Wall Street’s sentiments by applying behavioral finance from a value investor’s perspective to explain the quirks of human behavior that cause money managers and investors to ignore warning signs, overvalue bad investments, and participate in herd mentality.

Montier has been cited by a number of media outlets, including the Wall Street Journal’s MarketBeat blog, which noted that “Montier’s truly got a way with words.” His most recent GMO white paper has received media attention because of its analysis of unusual profit margins reported by U.S. companies. Not only are these profit margins at record highs, writes Montier, but “more freakish still is that these record high profit margins are coming during the weakest economic recovery in post-war history.”

Montier has written several books on behavioral finance and value investing. In a review of Montier’s book, Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance, Bruce Grantier of the Brandes Institute describes Montier as “a leading academic and practical authority on applying behavioural finance to investing,” and writes that in Behavioural Investing, “James Montier summarizes an immense body of research on behavioural investing and adds many new insights of his own.”

James Montier will be presenting The Flaws of Finance at the opening session of the 65th CFA Institute Annual Conference. More information on Montier and his work with behavioral economics and value investing can be found at the James Montier resource page on the Big Picture blog — which is maintained by conference speaker Barry L. Ritholtz. You can register to attend the conference to hear more from Montier in person, and follow this blog for more speaker updates as the conference draws closer.

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0 Responses to James Montier Applies Behavioral Finance to Value Investing

  1. Zolar says:

    Montiers comment has tendency of restoring integrity to the capital market and global trend worldwide.

  2. Amidst excessive fear or euphoria, people keep forgetting the tendency of “reversion to the mean”

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