- March 2010: Volume 22, Number 3

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Shop Talk: A Conversation with Andreas Calianos

by Rachel Speirs

Since the latest downturn, there’s been a lot of talk about the irrationality of the markets, investor exuberance, volatility and risk. With the economic climate somewhat improved, investors are starting to talk about what they should take away from the experience. You come at this from a unique perspective, as an expert in behavioral finance. What lessons, if any, do you take away from the downturn?

The idea of irrationality and rationality as it relates to markets is a fool’s gold area. We’re always acting irrationally; we’re always acting rationally. Irrational behavior doesn’t necessarily mean that you are foaming at the mouth. In the context of investing, irrational behavior often happens when we abandon skepticism and independent thinking and adopt a crowd mentality.

Markets reflect the range of human behavior from the most thoughtful to the most emotional extremes. As long as humans are the way they are, markets will always go to extremes. An

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