H.66 Behavioral finance Flashcards

A tendency for individuals to overestimate their knowledge, abilities, or predictions, often leading to excessive risk-taking in investing.

The tendency of individuals to follow the actions of a larger group, often leading to speculative bubbles or panic selling in financial markets.

A cognitive bias where people categorize money into different “buckets” based on subjective criteria, rather than viewing all funds as interchangeable.

The tendency to give greater weight to recent events or experiences when making financial decisions, often leading to short-term thinking.

The tendency for people to place a higher value on assets they own compared to identical assets they do not own, leading to reluctance to sell investments.

The tendency to seek out, interpret, and remember information that confirms pre-existing beliefs while ignoring contradictory evidence.

The way information is presented influences financial decision-making; for example, people may react differently to a 90% survival rate vs. a 10% mortality rate.