General

Question 1

Two types of behavioural biases:
A) cognitive
B) Emotional

Answer 1

Cognitive: results from sub-conscious mental procedures
- overconfidence
- representativeness - may think of a bad investment as good, even when many other good ones are presented
- Cognitive Dissonance - when people are presented with info that contradicts their beliefs
- availability- advertising makes an investment look good

Emotional - illogical reasoning
- Endowment - my belongings are more valuable than those I dont own.
- loss aversion- people have stronger impulse to avoid losses
- regret aversion- people avoid making decision in the fear that their decisions will be bad
- status quo - when faced with wide variety of options, they choose to keep things the same