Behavioral Finance: Peter Bernstein and The Journal
of Portfolio Management

Abstract

Behavioral finance is under construction as a solid structure of finance. It substitutes normal people for rational people in standard finance, behavioral portfolio theory for mean-variance portfolio theory, and behavioral asset pricing models for the CAPM and other models where expected returns are determined only by risk. Behavioral finance also distinguishes rational markets from hard-to-beat markets in the discussion of efficient markets and examines why so many investors believe that beating the market is easy. Peter Bernstein encouraged and guided the author of this article as he contributed to the construction of behavioral finance in the pages of The Journal of Portfolio Management (JPM). The JPM’s fortieth anniversary, the first ten-year anniversary without Peter, is an opportunity for the author to express his gratitude to Peter once more and describe his work published in JPM.