Rating: 
Summary: A random walk through behavioral finance.
Review: This book contains some interesting tidbits. Unfortunately, it is rife with serious errors and unwarranted assertions.For example, in chapter 6 Prof. Shefrin attempts to discredit contrarian sentiment indicators. For all I know they may be worthy of discredit. Unfortunately for his argument, the data he chooses to display, Figures 6-1 and 6-3, appear to support the value of these indicators. He declares the practice of investing in companies one knows to be "familiarity bias". While this is apt for employees with all funds in the company stock, he also applies it to Peter Lynch. According to Shefrin, Lynch beat the market 11 out of 13 years, and beat his nearest competitor by 6%(!) per year. Shefrin grudgingly admits there may have been some skill involved, but goes on to inform us that _investors_ "attribute too much of that success to skill rather than luck". Uh-huh. In his chapter on public offerings, Prof. Shefrin declares that existing shareholders are being ripped off, because dramatic gains at the start of trading demonstrate the IPO could have sold at a higher price. Apparently Prof. Shefrin is unaware that underwriters enter into an obligation to support the aftermarket, and would be unlikely proceed without a good chance of an aftermarket pop, nor would subscribers purchase. The chapter on closed end fund discounts is interesting. Unfortunately Prof. Shefrin fails to include the net present value of future management fees in his discussion. Perhaps there will be a much revised and improved second edition.
Rating: 
Summary: A slow waltz through the psychology of investing
Review: This book has a good heart, but I can't recommend it so highly. The author takes several classical cognitive mistakes that humans make (some will recognize the classic names of Kahnemann and Tversky; they are one of the substrates of this book). The author applies such mistakes to a wide range of investment problems - holding on to losing stocks too long, anthropomorphizing stock decisions, and so on. The sort of psychology that makes you think that a coin that has flipped tails three times now has a 95% chance of flipping heads on the next toss. Most intelligent readers (the sort that buy Harvard Press books) could get the same points in a much briefer format, like a book chapter or a 10-page article. For example, people tend not to save enough for retirement because the future seems a long time away and they think they'll catch up and it will work out. Well, yes. Next?
Rating:
Summary: A slow waltz through the psychology of investing
Review: This book has a good heart, but I can't recommend it so highly. The author takes several classical cognitive mistakes that humans make (some will recognize the classic names of Kahnemann and Tversky; they are one of the substrates of this book). The author applies such mistakes to a wide range of investment problems - holding on to losing stocks too long, anthropomorphizing stock decisions, and so on. The sort of psychology that makes you think that a coin that has flipped tails three times now has a 95% chance of flipping heads on the next toss. Most intelligent readers (the sort that buy Harvard Press books) could get the same points in a much briefer format, like a book chapter or a 10-page article. For example, people tend not to save enough for retirement because the future seems a long time away and they think they'll catch up and it will work out. Well, yes. Next?
Rating:
Summary: A Must Avoid for Novices
Review: This book resembles an MBA textbook but is not as entertaining. I have a BA in economics, a law degree and have read and studied investments for twenty years. However, I found this book difficult to understand and downright boring. Shefrin has some interesting and valid observations, but they are occluded by his endless resort to statistical studies and analyses of probabilities through coin tossing analogies. The layperson will gain little from this book. Half a chapter gets me to sleep everynight!
Rating: 
Summary: Comprehensive, Entertaining Overview of Fascinating Field
Review: Wondering what Brealy & Myers or Sharpe left out? Don't expect your broker (or fund manager, excepting Richard Thaler) to fill you in. This book is a must read for any active (or passive) participant in the markets, or any other citizen who is affected by said markets. Meaning all of us.
Shefrin provides a masterful exposition of the application of cutting-edge cognitive psychology to the behavior of retail and institutional investors, analysts, mutual fund managers, CEO's and even heavily-advised university investment committees. The result is the theoretical demolition of the efficient markets hypothesis in even its weakest form, and the related CAPM(s), catching up to their long-noted empirical failings. As it turns out the market does have a memory, and that's not just an anomaly any more. Not every trade is zero-NPV: trust the market price at your own peril. Think dividends are irrelevant? Think again.
What we're left with is a fascinating account of how market participants actually behave: holding on to losers too long, trading too much and trading on "noise," and most alarmingly, undersaving for retirement. What is significant is that these phenomena are so prevalent that they can no longer be dismissed as irrational with the hope that "more sophisticated" money will magically correct the market. To the contrary, what Shefrin describes is proved to be the psychological norm; if you believe you're different, you're either very lucky or overconfident about your lack of overconfidence.
One quibble, in an area that I have looked at before, is in Shefrin's discussion of takeovers. First, I found a bit of confusion between the question of whether the takeover premium should be tested by reference to the post-announcement combined value of both firms, or just the buyer. Since the buyer's CEO is initially fiduciary for just his shareholders, I see only the latter as relevant.
More significantly, Shefrin does not provide any means to rigorously discriminate among his hubris hypothesis and other, more rationalistic theories, such as agency costs and private benefits. And his brief treatment omits many puzzling follow-up questions: if CEO psychology has the potential to systematically destroy shareholder wealth, what should we then conclude about the investors and analysts who allow them to get away with it? Just a governance problem, or is there yet another psychological story to be told?
But the desire to delve further into the subject is just indicative of Shefrin's compelling and readable narrative. For bottom line types, I'm afraid the answer to your question is no, he doesn't explain how to get rich. But you'll surely do alot better with a single yellowing copy of Graham & Dodd than all the reams of abstruse, dogmatic journal articles ever spewed by the Chicago School.
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