BF+AA R1 Flashcards
Cognitive Errors vs Emotional Biases
CE: Inability to analyze information or incomplete information to make rational decisions
EB: Spontaneous reactions affecting how information in recieved
Anchoring and Adjusting
Mental Accounting
Framing Bias
Availability Bias
Are these Cognitive Errors (what kind?) or Emotional Biases?
These cognitive errors and they are Information Processing errors
Anchoring and Adjusting: Fixating on a target number and adjusting from there
Mental Accounting: Setting different goals for different pools of money
Framing: Viewing information differently depending on how information is presented
Availability: Future probabilities impacted by memorable events
Conservatism Bias
Confirmation Bias
Representativeness Bias
1) Base rate neglect
2) Sampling size neglect
Control Bias
Are these Cognitive Errors (what kind?) or Emotional Biases?
These cognitive errors and they are Belief Preservation errors
Conservatism Bias: Slow to adjust to new information
Confirmation Bias: Seek data supporting beliefs, discount contrary information
Representativeness Bias
1) Base: Too little consideration given to initial data
2) Sampling: Too much consideration given to too small data set
Control Bias: Feeling you have more influence over outcome than you actually do
Self Attribution Bias
1) Self Enhancing
2) Self Protecting
Self-Control Bias
Status Quo Bias
Endowment Bias
Regret Aversion
1) Errors of Omission
2) Errors of Commission
Are these Cognitive Errors (what kind?) or Emotional Biases?
These are emotional biases
Self Attribution Bias
1) Self Enhancing: Taking all credit for ones success
2) Self Protecting: Blaming others for ones failure
Self-Control Bias: Suboptimal savings fue to short term focus and lack of discipline
Status Quo Bias: Tendancy to stay with current investments
Endowment Bias: Placing more value on a held asset vs a non-held one
Regret Aversion
1) Errors of Omission - regret not taking action
2) Errors of Commission - regret taking action
