Behavioural Finance

Flashcards covering key terms and concepts from the lecture on behavioural finance.

Behavioural Finance

The application of psychology to understand human behaviour in finance or investing.

Cognitive Bias

Basic statistical, information processing, or memory errors that are common to all human beings.

Emotional Bias

A mental state that arises spontaneously, rather than through conscious effort.

Overconfidence Bias

Unwarranted faith in one’s intuitive reasoning, judgments, and cognitive abilities.

Availability Bias

Estimating the probability of an outcome based on how prevalent or familiar that outcome appears.

Loss Aversion

The tendency to feel a stronger impulse to avoid losses than to acquire equivalent gains.

Hindsight Bias

The belief that the outcome of an event was predictable after knowing the outcome.

Representativeness Bias

Classifying a new circumstance based on past classification systems, leading to incorrect understanding.

Endowment Bias

Placing more value on an asset one holds than on an asset one does not hold.

Status Quo Bias

The tendency to prefer things to stay the same rather than change.