Behavioral finance in practice
Some precautions
investors should
not neglect about their own behavior
Related articles published in the
Behavioral finance FAQ / Glossary
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Behaviors to take care of |
Main related Glossary articles/font> |
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1 - Activity:
Avoiding inertia and indecision as well as hyperactivity |
* Active / passive investing * Addiction * Bias for action * Boredom * Conservatism bias * Decision-making * Delaying * Hyperactivity * Inertia * Laziness * Noise trading * Overreaction / underreaction * Overtrade, overtrading * Passive investing / management * Procrastination * Short term bias * Status quo bias * Undertrading |
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2a - Anchoring: Trying not to be anchored on past references / values/div> |
* (under / slow) Adjustment * (mental) Anchor/ Anchoring * Belief * Confirmatory / confirmation bias * Dominant mental interest * Habit * Hindsight bias * Primacy effect * (mental) Reference point * Range estimate aversion * Repetition errors / mistakes * Selection bias * Selective (attention / exposure/ memory/ perception / reporting) * Stubbornness |
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2b - Reaction: Being sure to adjust to new situations and information |
* Cognitive consonance / dissonance * Denial (of realities) * Information (dissemination of, incidence of) * News (effect of, / reaction to) * Reaction (to info, news, events, signals) * Underadjustment * Underreaction / overreaction
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2c - Automaticity Check for unconscious reflexes and habits |
* Addiction * Attention anomaly * Automaticity / autopilot bias * Availability heuristic * Habit * Representativeness heuristic * Reflex |
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3 - Framing, heuristic: Avoiding narrow interpretations and over-simplifications |
(See also 2a. Anchoring, a type of heuristic) * Availability bias * Compartmentalization * Dominant mental interest * Frame (dependence, effect) / Framing (bias) * Generalization * (availability, representativeness) Heuristic * Knowledge acquisition * Mental accounts / compartments * (mental) Myopia * Narrow thinking * Oversimplification * Reductionism * (mental/cognitive) Representation * Representativeness heuristic * Stereotype * Paradigm * (decision) Paradoxes * (good) Story * Tunnel vision * Wealth frame * Wealth effect |
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4 - Fallacy, attention:
Revising erroneous knowledge and beliefs
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* Attention anomaly * Base rate neglect * Bounded rationality * (logical) Fallacy * Cluster illusion * Cognitive (bias, overload, psychology, trap) * Cost averaging * Curse of knowledge * Gambler's fallacy / paradox * Goodhart law * Hindsight bias * Logical fallacy * (short, long) Memory * Misperception * Misrepresentation * Monetary illusion * Numeracy bias * Perceived risk, risk perception * Perception * Round number anchoring * (risk of) Rare events * Recency bias, effect * Salience * Small numbers * Stupidity * Sunk-cost fallacy * (statistical) Tail risk * Uncertainty (vs. risk) |
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5a - Attitude (Aversion): Avoiding biased pleasure / pain expectations after decisions
5b - Attitude (Emotion): Avoiding primacy of emotions over reason
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* (common) Attitude
* Aversion, disposition and prospects * (disappointment, loss, risk, regret, uncertainty... )
Averse, Aversion * Disappointment aversion * Disposition effect * Get even bias * Risk
(attitude, aversion, neutral, perception, tolerance) * Loss averse, aversion * Prospect theory
* (expected) Regret * Regret (aversion / avoidance / minimization)
* Selling aversion * Uncertainty aversion * Throwing the sponge
* Affect, affect heuristic * Attachment bias * Commitment effect
* Compulsion / ive * Greed (& Fear) * Confidence * Divesture aversion * Emotion * Emotional bias
* Emotional intelligence / literacy / reasoning * Endowment effect * Familiarity * (Greed &) Fear
* Feeling * Foot in the door * Home bias * Hope (& fear) * Irrationality * Neuroeconomics
* Optimism / optimistic bias, overoptimism * Proximity bias * Rationalization, rationalize |
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6a - Mimicry: i> Being wary of biased social influence on decisions 6b - Manipulation: Being wary of deliberate biased influence |
* Bandwagon * Beauty contest * Bigger fool delusion * (Information) Cascade * Conformity
* Common (Belief, Convention, Knowledge, Paradigm * Consensus * Groupthink * Craze * Crowd behavior * Culture
* Deification / demonification * (rational-mimetic) Expectation* Fad * Fashion * Group behavior
* Herding *(mass, crowd, collective) Hysteria * Imitation * Mania (collective)
* Mass behavior * Meme * Mimicry * Momentum investing / trading * (general / social) Mood
* Neighborhood effect * Noise trading * Trend following * Peer pressure * (market / investor) Sentiment
* Social (anomaly, behavior, bias, cognition, influence, learning, psychology * Viral communication b>* Buzz * Cognitive manipulation * Deception * Guru * Hype * Manipulation * Media distortion |
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7 - Magic: Being wary of illusive expectations |
* Certainty effect * (illusion of) Control * Expectancy bias / effect * Gullibility * Illusion * Magical thinking, numbers * Mysticism, mystical, mystique * Mojo * Numerology * Superstition * Wishful thinking |
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8 - Pride: Trying not to be blinded by one's ego
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* Attribution bias / error * (illusion of) Competence * Complacency * (illusion of) Experience * Hubris * (illusion of) Knowledge * Narcissism * Overconfidence, overconfident * Pride * Projection bias * Self attribution * Self control bias, self discipline bias * Self esteem * Self-delusion * Self-illusion * Self-serving bias * Underconfidence, underconfident * Winner's curse |
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9 - Preferences: Having clear and consistent priorities |
* Competition - cooperation * Discipline * Empathy * Ethical, ethics * Expectation * Fairness * (Investment) Time horizon, preference, span * Game playing * Genetic utility * House money effect * Investor style * Long bias, longshot bias * Motivation * Ophelimity * Preferences (interactions, reversal, intransitivity, transitivity) * Transitive preferences / reasoning * (expected) Utility * Willpower |
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10 - Tilting: Trying to use or to protect from market mispricings |
* Anomaly * Asymmetry * Bubble / crash * Critical threshold * Cycle * Debiasing * Distribution curve anomaly
* Dynamical system * Extreme * Extrinsic value * Tat tail * Feedback loop * Fuzzy logic * Inefficiency
* Misalignment * Mispricing * Non-linearity * PBR / PER effect * Percolation * Persistence * Perverse effect
* Profile (stock, investor) * Reflexivity * Risk premium * Rotation (of attention, interest, image)
* (economic) Sector / concept fad * Stock image * Tilting * Trend * Underpricing / overpricing * Valuation / Value
* Vicious / virtuous circle * Winner's curse * Yin yang asset valuation
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