Framing Bias
What is Framing Bias? Framing bias occurs when people make a decision based on the way the information is presented, as opposed to just on the facts themselves. The same facts presented in two different ways can lead to people making different judgments or decisions. In behavioral finance, investors may react to a particular opportunity...
Loss Aversion
What is Loss Aversion? Loss aversion is a tendency in behavioral finance where investors are so fearful of losses that they focus on trying to avoid a loss more so than on making gains. The more one experiences losses, the more likely they are to become prone to loss aversion. Research on loss aversion shows...
Herd Mentality
What is Herd Mentality Bias? In behavioral finance, herd mentality bias refers to investors’ tendency to follow and copy what other investors are doing. They are largely influenced by emotion and instinct, rather than by their own independent analysis. This guide provides examples of how investors may succumb to herd bias, as part of behavioral...
Self Serving Bias
What is a Self Serving Bias? A self serving bias is a tendency in behavioral finance to attribute good outcomes to our skill and bad outcomes to sheer luck. Put another way, we choose how to attribute the cause of an outcome based on what makes us look best. Certainly, most of us can think...
Overconfidence Bias
What is Overconfidence Bias? Overconfidence bias is a tendency to hold a false and misleading assessment of our skills, intellect, or talent. In short, it’s an egotistical belief that we’re better than we actually are. It can be a dangerous bias and is very prolific in behavioral finance and capital markets. This guide will unpack...
