Investors Cutting Through the Noise Daniel Kahneman on applying behavioral psychology to financial advice. Undiscovered Manager 62 Aligning Interests 66 Value and Income Sector Snapshot: Utilities MORNINGSTAR CONVERSATION Sarah Newcomb Sector Rap 69 70 User Profile Feeding a Need to Help The 30th annual Morningstar Investment Conference in June was a fitting platform for a conversation with Daniel Kahneman, one of the founding fathers of behavioral economics and a recipient of the Nobel Memorial Prize in Economic Sciences in 2002. In partnership with Amos Tversky1 and others, Kahneman's research on judgment and decision-making established that heuristics and biases can lead to errors-a refutation of the perfectly rational investor. In "Prospect Theory: An Analysis of Decision Under Risk,"2 Kahneman and Tversky provided more realistic models of economic behavior and gave us the vocabulary of frames and anchors common in behavioral finance today. 1 Michael Lewis detailed their relationship and research in The Undoing Project: A Friendship That Changed Our Minds. 2016. New York: W.W. Norton & Co. 2 Kahneman, D. & Tversky A. 1979. "Prospect Theory: An Analysis of Decision Under Risk." Econometrica, Vol. 47, No. 2, pp. 263-292. Daniel Kahneman and Sarah Newcomb on the main stage at the 2018 Morningstar Investment Conference in Chicago. 56 Morningstar August/September 2018