Behavioural Edge and Market Psychology
Treating other investors' predictable errors as the source of return, and one's own as the main risk.
49 books · 29 people behind it · 3 reading lists
Start here
- The Psychology of MoneyMorgan Housel, 2020
- Thinking, Fast and SlowDaniel Kahneman, 2011
- Your Money and Your BrainJason Zweig, 2007
The people behind it 29
Each person holds a book in this entry or names it in their own tags.
Investors 12
Charlie Munger1 book here
Howard Marks1 book hereDD
David Dreman1 book here
Guy Spier1 book here
Clifford Asnessnamed in their tagsMM
Michael Mauboussinnamed in their tagsWJ
William J. Bernsteinnamed in their tagsCB
Christopher Brownenamed in their tagsLS
Larry Swedroenamed in their tagsVK
Van K. Tharpnamed in their tagsWR
Wesley R. Graynamed in their tags
Whitney Tilsonnamed in their tagsAcademics 10
Nassim Nicholas Taleb3 books here
Richard H. Thaler3 books hereDA
Dan Ariely3 books here
Daniel Kahneman2 books hereAS
Adam Smith1 book here
Andrew W. Lonamed in their tagsMM
Michael Mauboussinnamed in their tags
Robert J. Shillernamed in their tagsWJ
William J. Bernsteinnamed in their tagsRA
Robert A. Haugennamed in their tagsStrategists 2
Journalists 5
Michael Lewis1 book hereJZ
Jason Zweig1 book hereMH
Morgan Housel1 book here
Edwin Lefevrenamed in their tagsWG
William Greennamed in their tagsReading list — Essential Cognitive biases and decision flaws reading list · Superbook
10 books, in the order the list argues for
The literature on cognitive biases has a clear founding moment — the collaboration between Daniel Kahneman and Amos Tversky in the 1970s — and the reading list below traces the arc from that origin through its practical applications and its critics. Kahneman's own synthesis is the natural starting point, but the arc grows richer when paired with Ariely's behavioral-economics experiments, which shift the focus from l
Sources: Kahneman, Sibony & Sunstein — Noise (Penguin, 2021) · Charlie Munger — The Psychology of Human Misjudgment (1995 lecture, Harvard Law School) · Dan Ariely — Predictably Irrational, TED Talk (2009) · Michael Lewis — The Undoing Project (W. W. Norton, 2016)
Reading list — The best books on behavioral economics · Superbook
12 books, in the order the list argues for
The reading arc here starts with the empirical foundation: Kahneman's slow unpacking of System 1 and System 2 thinking, and the Nobel Prize-winning research on prospect theory and heuristics that preceded it. Ariely and Thaler then extend that foundation in different directions — Ariely into the everyday irrationality of markets and relationships, Thaler into what institutions and policymakers can do about it. From
Sources: Kahneman's Nobel Prize lecture (2002) · Thaler's Nobel Prize lecture (2017) · Ariely's TED talk: Are we in control of our own decisions? · Kahneman & Tversky: Prospect Theory (Econometrica, 1979)
Reading list — The best books on money and psychology · Superbook
10 books, in the order the list argues for
The arc of this list moves from behavior to belief to system. It starts with the empirical: Housel's observation that financial outcomes depend less on intelligence than on temperament and time horizon, and Kahneman and Tversky's downstream influence on how we understand loss aversion and the way framing warps choices about money. Ariely's work on mental accounting and Thaler's on the endowment effect sit in this em
Sources: Morgan Housel: The Psychology of Money (Collaborative Fund blog) · Brad Klontz: Money Scripts research overview · Mullainathan & Shafir: Scarcity (Science, 2012) · Jason Zweig: Your Money and Your Brain interview
Books 49
Edwin Lefèvre · 1923 · The Livermore book; market psychology observed from inside a position.
Fred Schwed · 1940 · Wall Street satire on fees and the gap between broker and client
Adam Smith · 1968 · The classic on markets as a game of psychology and identity
Mihaly Csikszentmihalyi · 1990 · Optimal experience and attention; the psychology of absorbed work
Daniel Kahneman · 2011 · The two-systems account behind most of what investors call behavioural bias.
Andrew WilkinsonCharles de VaulxFrank MartinMichael MauboussinMohnish PabraiRational Capital Investment FundSeth KlarmanStewart BrandAbi Tyas TunggalAlbert WengerAlfred LinAmy HoodBill GatesBryan JohnsonCharlie MungerDaniel BurkaDavid CancelDavid HellmannEv WilliamsJason FriedJason ZweigJulie ZhuoMarc AndreessenNassim Nicholas TalebNaval RavikantPaul BassatRay DalioRon ConwaySahil BloomSahil LavingiaSam AltmanSatya NadellaSophie BakalarTristan Harris
Howard Marks, Paul Johnson · 2012 · Marks on risk, cycles and second-level thinking, with commentary.
W. Timothy Gallwey · 1974 · Performance under pressure; the self-interference problem investors recognise
Robert M. Sapolsky · 1994 · Sapolsky on chronic stress and its effect on decision quality
Leon Levy, Eugene Linden · 2002 · Oppenheimer founder on psychology, bubbles and a career in markets
Barry Schwartz · 2004 · Why more options reduce satisfaction and worsen decisions
Jason Zweig · 2007 · Neuroscience of investing decisions, written by Graham's modern editor.
James Montier · 2009 · Montier applies behavioural evidence to a value investing process.
John Coates · 2012 · A former trader turned neuroscientist on hormones and risk-taking
Charles Duhigg · 2012 · Habit loops in people and companies; why routines drive repeat purchase
T2 Misbehaving
Richard H. Thaler · 2015 · How behavioural economics won the argument, told by the man who ran it.
Morgan Housel · 2020 · Short essays on why behaviour beats analysis in determining outcomes.
Barry Ritholtz · 2025 · Common investing mistakes catalogued by a working asset manager
David Dreman · 1999 · Dreman argues low-expectation stocks beat glamour over full cycles.
Hersh Shefrin · 2000 · The academic bridge between behavioural finance and portfolio practice.
John Allen Paulos · 2003 · A mathematician's own losses used to explain market probability errors
James Montier · 2010 · Practical countermeasures rather than a catalogue of biases.
Guy Spier · 2014 · Spier on the psychology and habits behind durable value investing.
Nassim Nicholas Taleb · Taleb's constructive response to the bias literature: instead of trying to fix human judgment, build systems that benefit from volatility. A challenge to the nudge-and-correct approach taken by Kahneman and Thaler.
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Dan Ariely · Ariely and Kreisler's book on money irrationality covers pain of paying, opportunity cost neglect, and the psychology of credit card spending. It extends Ariely's earlier research into financial contexts specifically, and the experiments here are among the most readable in the genre.
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Nassim Nicholas Taleb · Taleb's opening salvo on how humans systematically confuse luck with skill, especially in finance. The behavioral economics research on hindsight bias and narrative fallacy is here, but framed aggressively rather than academically.
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Ramit Sethi · Sethi's contribution to money psychology is behavioral rather than analytical: he designs financial systems that work with human laziness and inconsistency rather than against them. His argument that automation beats willpower as a financial strategy is well-supported by the literature on ego depletion and habit formation.
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Stuart Sutherland · First published in 1992 and less famous than it deserves to be. Sutherland was a psychologist at Sussex who synthesized experimental evidence from social psychology, cognitive science, and psychiatry into a single readable volume. His treatment of in-group bias, obedience research, and medical decision-making fills gaps that the Kahneman-focused literature tends to leave.
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Claudia Hammond · Klontz and Klontz introduced the concept of money scripts — inherited, often unconscious beliefs about money formed in childhood — and this book is the clearest account of the four script types: money avoidance, money worship, money status, and money vigilance. The clinical case material grounds the theory in ways that purely empirical books don't.
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Richard H. Thaler · Thaler's memoir of behavioral economics as a discipline reads as a history of how the field fought its way into mainstream economics. The Econs versus Humans distinction is useful shorthand, but the deeper contribution is showing how institutional design — retirement savings defaults, cafeteria layouts — can nudge behavior without restricting choice.
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Carol Tavris, Elliot Aronson · Tavris and Aronson focus on what happens after a bias fires: the self-justification, narrative revision, and escalating commitment that follow. Cognitive dissonance, they argue, is not a personality flaw but a universal mechanism, and understanding it explains police misconduct, political tribalism, and therapy failures in a single framework.
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Daniel Kahneman, Olivier Sibony, Cass R. Sunstein · Kahneman's follow-up to Thinking, Fast and Slow shifts the focus from systematic bias to statistical noise: the finding that two doctors, two judges, or two underwriters given the same case will reach different conclusions for no principled reason. The implications for hiring, forecasting, and clinical judgment are uncomfortable and largely unaddressed in organizations.
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Richard H. Thaler, Cass R. Sunstein · Thaler and Sunstein's case for 'libertarian paternalism' — using choice architecture to steer people toward better decisions without removing options. The foundation for behavioral public policy, from organ donation defaults to retirement savings design.
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Charlie Munger · The Psychology of Human Misjudgment chapter — Munger's own lecture, reproduced in full — is the most practically organized treatment of cognitive bias in any investing text. He names 25 tendencies, illustrates each with a story, and asks how they compound. Reading this after Kahneman shows how the academic vocabulary translates into judgment under real stakes.
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Andrew WilkinsonCharlie MungerChristopher BloomstranFrancois RochonGuy SpierLi LuMichael MauboussinMohnish PabraiWarren BuffettBill GatesDaniel EkDrew HoustonEric JorgensonJosh WolfeMarc AndreessenMatt MullenwegMichael BatkoNathan MurphyNaval RavikantNiki ScevakPatrick CollisonRamit SethiRyan PetersonSam AltmanShane ParrishTerrance McArthurThe Barefoot InvestorTim Ferriss
Dan Ariely · Ariely's contribution is showing that our irrationality is not random — it follows predictable patterns that can be mapped and, to some degree, engineered around. His experiments on relativity, free, and social versus market norms each isolate a mechanism that pure psychology literature tends to bury in statistical tables.
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Sendhil Mullainathan, Eldar Shafir · Mullainathan and Shafir's research on cognitive bandwidth shows that financial scarcity — not just poverty but any experience of not having enough — tunnels attention in ways that make long-term planning harder and short-term mistakes more likely. It reframes willpower-based explanations of financial failure without excusing the structural causes.
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Daniel Gilbert · Daniel Gilbert's accessible account of affective forecasting — our poor ability to predict what will make us happy. His research on immune neglect and focalism is less cited than Kahneman's work but equally well-evidenced.
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Dan Ariely · Ariely's research on cheating shows that most people will bend rules slightly but not dramatically — a finding that complicates simple models of self-interest. His fudge factor theory is at odds with rational-choice accounts of honesty.
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Carl Richards · Carl Richards, a financial planner, uses simple sketches to map the distance between what people know they should do with money and what they actually do. His treatment of financial decisions as emotional events first and numerical events second is practically useful in a way that academic behavioral finance rarely is.
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Nassim Nicholas Taleb · Less directly about cognitive bias than Fooled by Randomness, but the argument — that rare, high-impact events are systematically underweighted because we build models from past data — depends entirely on behavioral economics research on availability and representativeness.
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Kevin Simler, Robin Hanson · Hanson and Simler make the most provocative claim in this list: that self-deception is not a flaw but an adaptive strategy — we hide our real motives from ourselves so we can more convincingly hide them from others. If true, the entire bias-correction project has a ceiling. This book belongs at the end so it reframes everything before it.
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Michael Lewis · Michael Lewis's account of the Kahneman-Tversky collaboration works as intellectual biography and as a second path through the research for readers who find academic writing slow. The friendship and its eventual fracture clarifies how two very different minds produced work that neither could have done alone.
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David McRaney · McRaney's blog turned book is the most self-deprecating entry on the list — each chapter names a bias, explains the research, and shows how the author himself falls for it. The format is reductive but effective for readers who want a broad survey without the weight of the primary sources.
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Vicki Robin · Robin and Dominguez reframe the core question from 'how do I manage money?' to 'what is money exchanged for?' The life-energy accounting method they introduce is less a budgeting tool than a values-clarification exercise — one that makes the link between spending and identity concrete and trackable.
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Michael M. Pompian · 2008 · Applies behavioural finance to building portfolios for real clients.
Michael M. Pompian · 2012 · Classifies investors into behavioural types for advice and design.
“Adam Smith” (aka George Goodman)
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