Behavioral finance

American economist

American economist

discipline of economy studying the effects of psychological, cognitive, emotional, cultural and social factors on decisions

mistaken belief that more frequent chance events will lead to less frequent chance events, or vice versa, to balance out

Israeli psychologist (1937–1996)

economic theory that asset prices fully reflect all available information, so that it is impossible to "beat the market" consistently on a risk-adjusted basis

tendency of a financial market to move in a particular direction over time

paradox involving a game with repeated coin flipping

how individuals in a group can act collectively without centralized direction

preference against risk, a common human behavior of attempting to lower uncertainty and avoid risk

theory of behavioral economics and behavioral finance that was developed by Daniel Kahneman and Amos Tversky in 1979

cost that has already been incurred and cannot be recovered

cognitive bias to think of money in nominal, rather than real, terms

error in thinking which involves under-valuing base rate information

an emotional bias, which is a preference for the current state of affairs as opposed to a change

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apparent violation of the predictions of expected utility theory

the finding that people are more likely to retain an object they already own than to acquire that same object when they do not own it

design of ways of presentation of choices to consumers and their impact to consumer decision-making

economic concept

attempt made by investors to avoid negative financial information

Consumer behaviour model

predictability in a financial market that seems to be inconsistent with (typically risk-based) theories of asset prices

tendency of individuals to offer greater aid when a specific, identifiable person is observed under hardship, as compared to a large, vaguely defined group with the same need

behavioral phenomenon

American psychologist

economics concept

type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.

stock market speculator

general attitude of investors to market price development

Hypothesised seasonal financial anomaly

selling of assets that have increased in value, while keeping assets that have dropped in value

Economic model

annual stock market calendar effect

form of cognitive bias relating to currency

probability distribution with high skewness or kurtosis, empirically encountered in a variety of areas

new equilibrium price of a commodity