This chapter discusses personal financial planning, which is an interdisciplinary practice that employs a six-step process to develop integrated strategies for individuals and families to efficiently mobilize their human and financial capital to achieve their life goals. Financial planning draws...

In recent decades, trading has become very popular among retail investors, mainly owing to widespread use of technology and a reduction in transaction costs. However, the growing information available to individuals and the higher complexity of financial markets have led investors to make...

In the oversight of most funds, the portfolio manager holds the key decision-making power. Often regarded as foundational to the investment process, a few select managers can attract billions of dollars from investors, giving the managers increased prominence, credibility, and compensation....

This chapter focuses on the attitude of investors toward financial gains and losses and their decisions on wealth allocation, and how these changes are subject to behavioral factors. The focal point is the integration of behavioral elements into the classic portfolio optimization. Individual...

Asset allocation and portfolio diversification decisions have important welfare and policy implications. This chapter reviews studies that examine three key aspects of financial investing: participation in stock markets, portfolio diversification, and trading behavior. Standard finance theory...

This paper provides a different way of thinking about, and dealing with, four important issues. First, the overarching purpose of a firm involves communicating a vision, organizing to survive and prosper, working continually to develop win-win relationships, and taking care of future...

We use machine learning methods to create a comprehensive measure of credit risk based on qualitative information disclosed in conference calls and in management's discussion and analysis section of the 10- K. In out-of-sample tests, we find that our measure improves our ability to predict...

This survey introduces and reviews the field of behavioral finance. It outlines the traditional finance approach, which builds upon rational acting investors, its assumptions, and its shortcomings. Moreover, it surveys the main findings from psychology and sociology that contrast with this...

This paper examines the implications of the option value of equity for firms' disclosures. Merton (1974) shows that the equity of levered firms is equivalent to a call option whose value increases in the expected variance of future cash flows. I use this equivalence to calculate firms' vega,...

The CAPM is commonly used for an introduction of the equity cost in practice to calculate the corporate value, which is composed by the risk-free rate, equity market return and each respective beta. However, there is a fundamental complication between the risk, cost and return for the equity...