Financial Theory FORUM View Human Aspects Financial Markets The value of any asset is equivalent to its discounted future cash flows. Financial markets are inherently inefficient, regularly mis-pricing assets. Markets are driven by Institutional incentives & imperatives Fear and greed, mass psychology Short-termism Businesses The earnings potential of a business is determined by its sustainable competitive advantage. A manager with wrong character traits and values can devalue or destroy any business. Managers have Different skills Different characters Different goals Investors Active investing with outstanding brains and a defined process will generate Alpha. The biggest risk factors in investing are bounded rationality and lack of discipline - WE ourselves are the biggest risk! Investors are hampered by a plethora of mental limitations and biases.