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Some highly recommended books

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Market Wizard
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Some books on market psychology and related subjects

Hersh Shefrin: Beyond Greed and Fear
Martin J. Pring: Investment Psychology Explained

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Now if the subject is extended a little bit you might have a look at agent based artificial societies. One of the playgrounds would be Sugarscape - Growing Agent-based Artificial Societies (www.sugarscape.sourceforge.net)

Those are dumb and simple creatures, but behave in a similar way as human crowds. Basically shows that nonlinear systems mostly do not have equilibrium points but tend to spend considerable time in seemingly stable configurations before breaking out of these in a violent manner. Trading ranges followed by trending moves. Without these properties of non-linear systems we would only see Gaussian distributions and random markets, and mean reversion models as traded by LTCM might actually work.

Some books that extend the subject a little bit to individual behaviour and behavioural economics (it's a bit off-topic, but I enjoyed the reads):

Robert A. Akerlof and Robert J.Shiller : Animal Spirits
Ori Brafman and Rom Brafman: Sway -The Irresistible Pull of Irrational Behaviour
Richard H. Thaler: The Winner's Curse

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Last edited by Fat Tails; April 11th, 2010 at 12:34 PM. Reason: false link
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