Behavioral Finance

Study of various phsycological factors that can affect financial market.

5 main concepts of behavioral finance

The propensity for people to allocate money for specific purposes.

States that people tend to mimic the financial behaviors of the majority of the ___.

Refers to decision making based on extreme emotions or emotional strains such as anxiety, anger, fear, or excitement.

Refers to attaching a spending level to a certain reference. Occurs when people rely too much on pre-existing information or the first information they find when making decisions.

Refers to a tendency to make choices based on overconfidence in one's own knowledge or skill.

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

When investors' memory of recent events make them biased or leads them to believe that the event is far more likely to occur again.

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

When investors tend to invest in what they know, such as domestic companies of locally owned investment.