Behavioural finance
PRAAMS notes on investing biases: status quo, hindsight, loss aversion and more. Read the series and check your profile with BehaviouRisk today.
Conservatism bias. Being stubborn may help in everyday life but not in asset allocation.
Availability bias. Be afraid of coconuts, not sharks.
Hindsight bias. Was the market correction of 2022 a negative surprise for your asset allocation strategy, or did you ‘know it all along’?
Outcome bias. A ‘hot’ trade idea may be just a bubble about to burst.
Framing bias. Your risk appetite is manipulated by how the broker’s questionnaire is worded.
Self-attribution bias. Not all successful trade ideas are thanks to your genius, and not all failures are due to external risk factors.
Regret aversion bias. Complete avoidance of investment risks is as harmful as excessive risk-taking.
Representativeness bias. Your mind classifies new information using familiar analogies. However, it increases your portfolio’s investment risks.
Self-control bias. A $50,000 SUV will cost you $872,000 without a proper asset allocation strategy.
Status quo bias. What do you do when your trade idea goes wrong?
Confirmation bias. Can Elliot waves reveal sacred signals to achieve your financial goals?
Recency bias. Risk analysis of the longer-term data makes sense, doesn’t it?
Illusion of control bias. The truth is that no one can control the market; a blind belief that you are The One renders your investment goals unreachable.
Cognitive dissonance bias. When new information conflicts with the prior investment decision, smart investor acknowledges it. Do you?
Affinity bias. After all, are your financial goals about supporting the company’s attractive social image or earning money?
Mental accounting bias. In asset allocation, all baskets of eggs are equal.
Loss aversion bias. Your risk appetite is around 2:1.
Overconfidence bias seriously affects your investment decisions and undermines financial goals
Behavioural economics for smart investment and risk-aware portfolio management