Behavioral Bias Flashcards
What is “anchoring” bias behavior?
Anchored in their initial buy/sell price, even when circumstances change. Anchors won’t budge!
What is the Prospect Theory?
People suffer more greatly from losses than they benefit from gains.
What is the vonRestorff Effect?
Hint: (Von - German/bold)
The item that sticks out is more likely to be remembered.
What is the Dunning-Kruger Effect?
Hint: (DK - don’t know)
A person’s lack of knowledge causes them to overestimate their own competence.
What is Weber-Fechner Law?
Hint: (WtF)
The difficultly in seeing/comparing small differences in large quantities of something. Too much to comprehend.
What is the Zeigarnik Effect?
Hint: z done…
Completed tasks are forgotten more readily than incomplete tasks.
What is “home bias”?
Sticking with what you know/are familiar with. Staying with Domestic Stocks vs. Foreign Stocks. Can result in a single stock concentration.
What is heuristic problem solving?
Hint: hurry
Quickly judging based on past experience/information
ie: rules of thumb, educated guesses, trial and error
Which bias leads investors to sell winners too quickly and hold on to losers for too long?
Disposition effect
What is it called when an investor takes on significantly more risk following gains?
House money effect.
What bias the tendency to use your first or overall impression of a person to evaluate specific traits that you haven’t actually observed.
The halo effect
What is a learned behavior and preference that moves you through the world, and greatly impact your financial decisions?
Money
which include:
money avoidance,
money vigilance,
money worship, and
money status.
What bias is exhibited by an assumption that what just occurred is likely to be a reality for the foreseeable future?
Recency bias
