Biases

Question 1

Behavioral finanance terms - Affect Heuristic

Answer 1

Dealing with judging something based on non-financial issues

Question 2

Behavioral finanance terms - Anchoring

Answer 2

Attaching to one reference point and staying with it with no logic

Question 3

Behavioral finanance terms - Availability Heuristic

Answer 3

Relying upon knowledge that is readily available in their memory - maybe causing overweight to recent events and paying little attention to longer term trends

Question 4

Behavioral finanance terms - Bounded rationality

Answer 4

knowledge Limits on what the investor can use. Investors often times make sure they can satisfy something in their portfolio instead of making the absolute best option.

Question 5

Behavioral finanance terms - Confirmation bias

Answer 5

People tend to filter info that supports their opinions

Question 6

Behavioral finanance terms - Cognitive dissonance

Answer 6

The tendency to misinterpret information that is different from their, hence they only pay attention to their own viewpoints

Question 7

Behavioral finanance terms - Dispoistion effect (regret avoidance)

Answer 7

Investors making mental accounts on when they bought a stock and only view it as the original purchase price - even though the market has changed

Question 8

Behavioral finanance terms - Familiarity Bias

Answer 8

Investors tend to overestimate/underestimate the risk of investments which they are unfamiliar/familiar with

Question 9

Behavioral finanance terms - Gambler’s Fallacy

Answer 9

Having incorrect understandings which can lead to bad predictions

Question 10

Behavioral finanance terms - Herding

Answer 10

Following the masses

Question 11

Behavioral finanance terms - Hindsight bias

Answer 11

Looking back after the fact is known and thinking that they could have predicted it

Question 12

Behavioral finanance terms - illusion of control bias

Answer 12

Investors tend to overestimate their ability to control events

Question 13

Behavioral finanance terms - Overconfidence bias

Answer 13

Listens to themselves too much and too heavily rely on their skills and capilbilities - end up going too risky

Question 14

Behavioral finanance terms - Overreation

Answer 14

Emotions at the recipt of news or information

Question 15

Behavioral finanance terms - Prospect theory (Loss Aversion)

Answer 15

People treat gains and losses differently. Gains are not worth as much as losses // (Investors feel more pain from losses than enjoyment of gains)

Question 16

Behavioral finanance terms - Recency

Answer 16

Giving too much weight to recent events

Question 17

Behavioral finanance terms - Similarity Heuristic

Answer 17

Using the same decision on an event that appears to be a similar situation but the outcome is entirely different

Question 18

Behavioral finanance terms - Representativeness

Answer 18

thinking that a good company is a good investment without regard to an analysis

Question 19

Behavioral finanance terms - Familiarity (Not Familiarity Bias)

Answer 19

Investment in companies that you know of, like your employer

Question 20

a

Answer 20

a