ULOA

Question 1

A sub-field of behavioral economics, proposes that psychological influences and biases affect the financial behaviors of investors and financial practitioners.

Answer 1

Behavioral Finance

Question 2

• how individual behave when it comes to finances/ investments or economic stuff.
• help understand why people make certain financial choices and how those choices can affect markets

Answer 2

BF

Question 3

how psychological influences can affect market outcomes.

Answer 3

Behavioral Economics

Question 4

one of the key aspects of behavioral finance studies

Answer 4

Influence of biases

Question 5

affects decision making related to finances.

- Affects the financial market

Answer 5

Psychological factors/ influences

Question 6

sources of all types of market anomalies and specifically market anomalies in the stock market, such as severe rises or falls in stock price.

Answer 6

Influences and biases

Question 7

study the very specific ways our brain tend to stumble when making money decisions

Answer 7

 Behavioral finance scientist

Question 8

measure our ability to override our incorrect gut response and to engage our wiser more rational brain

Answer 8

 Cognitive reflection

Question 9

shows that most of us are pretty bad at taming our often-misguided instinctual brain
- Reveals the specific situations when we’re most likely to slip up and make a bad choice.

Answer 9

 Behavioral finance research

Question 10

propensity for people to allocate money for specific purposes.

• separate money for specific purposes
• subconscious/ conscious

Answer 10

• Mental accounting

Question 11

people tend to mimic the financial behaviors of the majority of the herd.

Answer 11

• Herd behavior

Question 12

decision making based on extreme emotions or emotional strains such as anxiety, anger, fear, or excitement. Oftentimes, emotions are a key reason why people do not make rational choices.

Answer 12

• Emotional gap-

Question 13

attaching a spending level to a certain reference. (Examples : spending consistently based on a budget level or rationalizing spending based on different satisfaction utilities.) (budgeting money on groceries)

Answer 13

anchoring

Question 14

• a tendency to make choices based on a confidence in self-based knowledge.
• Self-attribution usually stems from intrinsic confidence of a particular area. Within this category, individuals tend to rank their knowledge higher than others
• Tendency to make choices based on overconfidence in one owns knowledge or skill
• Intrinsic knack in a particular area (knows too much than others)

Answer 14

self attribution

Question 15

• when investors sell their winners and hang onto their losers. Investors’ thinking is that they want to realize gains quickly.
• However, when an investment is losing money, they’ll hold onto it because they want to get back to even or their initial price. Investors tend to admit they are correct about an investment quickly (when there’s a gain). However, investors are reluctant to admit when they made an investment mistake (when there’s a loss).
• Stand in what I believe
• Tendency at any given point in

Answer 15

Disposition Bias

Question 16

when investors have a bias toward accepting information that confirms their already-held belief in an investment.

Answer 16

Confirmation Bias -

Question 17

occurs when investors’ memory of recent events makes them biased or leads them to believe that the event is far more likely to occur again.

Answer 17

Experiential Bias

Question 18

when investors place a greater weighting on the concern for losses than the pleasure from market gains.

• In other words, they’re far more likely to try to assign a higher priority on avoiding losses than making investment gain.

Answer 18

Loss Aversion -

Question 19

when investors tend to invest in what they know, such as domestic companies or locally owned investments.

• Investors are not diversified across multiple sectors and types of investments, which can reduce risk.
• Investors tend to go with investments that they have a history with or have familiarity.

Answer 19

Familiarity Bias -

Question 20

brain’s pesky tendency to believe that a random act is caused by another random act. (every now and then we’re winners in the market)

Answer 20

 Illusory correction bias

Question 21

• over value information that we recently read

Answer 21

losers

 Recency Bias ¬

Question 22

habits to recall events that never happened because it fits our narrative.

Answer 22

 False Memory Bias

Question 23

bias to over trust facts we can easily pull from memory

Answer 23

 Availability heuristic bias

Question 24

brains tendency to be widely wrong at estimating risks

Answer 24

 Neglect of probability bias-

Question 25

inclination to over trust the opinions of winners and discount the advice of those who loss.

Answer 25

 Survivorship bias

Question 26

states all equities are priced fairly based on all available public information is often debunked for not incorporating irrational and emotional behavior.

• that at any given time in a highly liquid market, stock prices are efficiently valued to reflect all the available information.

Answer 26

Efficient Market Hypothesis (EMT) -