Psychology and behavioral finance

Psychology and Behavioral Finance

Outline ,[object Object],[object Object],[object Object],[object Object]

Behavioral Finance ,[object Object],[object Object],[object Object]

Behavioral Quirks ,[object Object],[object Object]

Questions About Quirks ,[object Object],[object Object]

Top Behavioral Issues for Finance ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Overconfidence ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Overconfidence and Investor Behavior ,[object Object],[object Object],[object Object],[object Object],[object Object]

Overconfidence and Risk taking ,[object Object],[object Object],[object Object]

Loss Aversion/House Money ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Anchoring/ Representativeness ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Regret ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Regret “ My intention was to minimize my future regret. So I split my contribution 50/50 between bonds and stocks.” Harry Markowitz

Mental Accounting ,[object Object],[object Object],[object Object]

Probability ,[object Object],[object Object],[object Object],[object Object]

Probability Mistakes ,[object Object],[object Object],[object Object],[object Object]

Linda is 31 years old, single, outspoken, and very bright. She majored in environmental studies. She is an avid hiker, and also participated in anti-nuclear rallies. Which is more likely? A.) Linda is a bank teller. B.) Linda is a bank teller and a member of Green Peace.

Gambler’s Fallacy Law of Small Numbers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Ambiguity: Risk and Uncertainty ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Donald Rumsfeld on Ambiguity “ Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don't know we don't know.”

Herding ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Internet Stocks and Herding ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Experiments ,[object Object],[object Object],[object Object]

Information Cascades ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Summary ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Psychology and behavioral finance

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Psychology and behavioral finance