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Transcript of JP MORGAN
Foojan Jahanian Presented by The study of how investors make decisions and how these decisions affect stock prices and broad market movement Behavioral Finance Conclusion JP Morgan Chase & Co. A leading financial services firm with assets of $1.3 trillion and operations in more than 50 countries
Earliest predecessor organization dated back to 1799
Combining of JP Morgan, Chase, Chemical, and Manufacturers Hanover into one firm led to the formation of JP Morgan Chase & Co. Business Segments and Brands The Investment Bank and Asset Wealth Management (JP Morgan brand)
Treasury & Securities Services (JP Morgan Chase brand)
Commercial Bank, Card Services, and Retail Financial Services (Chase Brand). The Asset and Wealth Management Segment Provided investment and wealth management services for institutions and individuals
Private Client Services (PCS)
Asset Management Behavioral Finance Began in 1992 in London ( Andrew Spencer)
Beat its benchmark in 9 0f its first 10 years Investment Philosophy Momentum stocks
Value stocks Implementation Stock selection:
do the opposite of what most people “feel like” doing
with an optimizer maximizing exposure to stocks with value and momentum, while controlling other risk exposures
The result was a portfolio consistently long value and long momentum, with other risks squeezed out of the portfolio Momentum and Value outperformed
Another study: these two combined has outperformed the Momentum (1.1%) and beat the value version (6.4% ) all while incurring less risk Behavioral biases 1. Overconficence 2. Loss aversion make decisions using limited information
Overvaluation and undervaluation
Value Strategy works Disposition effect
As a consequence movement of stocks in either direction is slowed down
Momentum strategy works What did they do so far?
Embrace psychology and behavioral finance in the retail market
Keep an international mindset
Goal: Solidify JP Morgan's behavioral finance brand with retail brokers Avoid overconfidence Change investment behavior Focus on out of fashion stocks that they wouldn't naturally have bothered with Not fall into the overconfidence trap Avoid overconfidence Advising services 1. Wealth sign and passion points 2. Language, service and client reviews Understand the needs and wants of clients.
80% emotion and 20% fact Artisan The Good Life Legacy Unplugged Wellville Wealth signs Language Service Client reviews Talk: know what to say and how to say it based on wealth sign Putting use of language & service skills at client reviews
Understand client's passion points and behavioral biases
Avoid clients overconfident, anchored or going through recency effect
YOU CAN MANAGE THEM, not elimitate them Basically... Competition (bigger and fiercer) Understand clients' investing biases, need to CONNECT: be behaviorlarists Client acquisition, retention and referrals Better relationships with clients -Behavioral Finance lead JP Morgan to expansion plans
-The success of Behavioral Finance attracted new competition
-Always be challenges
-Differentiation, understanding of clients & ongoing research of new trends = build new strategies
-Will lead to more growth to achieve those expansion plans Behavioral Finance Strategies - investor irrationality
- predicting irrationality
- profiting from irrationality The start of Behavioral Finance's expansion - Europe - The US - Retail Brokers
- 5 new funds launched
- Rising interest from Institutional Investors The USA in depth Performance - Retail Brokers
- 5 new funds launched
- Rising interest from Institutional Investors Final thoughts on expansion strategy - Japan!
- lessons to be learned
- different cultures, different investment patterns