Behavioral Finance Flashcards
1
Q
Heuristics
A
Mental shortcuts that help people understand the world by using information that is easy to recall.
2
Q
Loss Aversion
A
People weigh losses more than twice as heavily as potential gains. It’s more comfortable not to lose $10 than to find $10.
3
Q
Prospect Theory & Loss Aversion
A
Similar in that investors hate “losing”
4
Q
Financial Enmeshment
A
Happens when the finances of parents and children are inappropriately commingled.
5
Q
Endowment Effect
A
An emotional bias that causes individuals to value an owned object higher, often irrationally, than its real-world market value.
