Misbehaving: The Making of Behavioral Economics

by Richard H. Thaler

A good rule to remember is that people who are threatened with big losses and have a chance to break even will be unusually willing to take risks, even if they are normally quite risk averse. Watch out!

An implication of this analysis is that the more often people look at their portfolios, the less willing they will be to take on risk, because if you look more often, you will see more losses.

Whenever anyone asks me for investment advice, I tell them to buy a diversified portfolio heavily tilted toward stocks, especially if they are young, and then scrupulously avoid reading anything in the newspaper aside from the sports section. Crossword puzzles are acceptable, but watching cable financial news networks is strictly forbidden.

Groucho famously said that he would never want to belong to any club that would have him as a member.

When people are given what they consider to be unfair offers, they can get angry enough to punish the other party, even at some cost to themselves. That is the basic lesson of the Ultimatum Game.

if you want people to comply with some norm or rule, it is a good strategy to inform them (if true) that most other people comply.