30 Questions
What are the two categories that investing biases can be categorized into?
Cognitive Bias and Emotional Bias
Which bias refers to the tendency of people to stick to their current situation or decision?
Status Quo Bias
What type of biases are generally easier to mitigate or eliminate?
Cognitive Errors
Which bias involves people valuing something more when they own it?
Endowment Bias
Which type of judgment is influenced by impulse, intuition, and feelings rather than facts?
Emotional Judgment
Which bias involves making decisions based on how the information is presented rather than on the actual information itself?
Anchoring & Adjustment
What is the primary coping mechanism people use in high-controlled situations?
Inevitability
How can investors mitigate hindsight bias according to the text?
Remind oneself of the cyclical nature of markets
What is the principle that states our choices are influenced by the way things are presented?
Framing Bias
In what framing do people tend to be risk-averse according to the text?
Gain framing
What is a common outcome of excessive hindsight bias in investors?
Overconfidence
What belief may lead to over-criticizing the performance of others?
Believing predictions were more accurate than they actually were
What bias is Emong exhibiting in his investment decisions?
Confirmation Bias
What does Emong do instead of reading the entries and notes in the company's Balance Sheet?
Listens to his Guru's technical analysis on Facebook
What is one way to overcome confirmation bias according to the text?
Actively seek and consider information that contradicts your opinion
Which bias term was first coined by Ellen Langer in her 1975 paper?
Illusion of Control Bias
What makes Emong overconfident in his investment decisions?
Confirmation Bias
What should Emong make use of according to the text to have a more comprehensive analysis?
Both fundamental and technical analysis
What does overconfidence entail?
Thinking you know more than you do
Which bias causes people to prioritize short-term desires over long-term goals?
Self-Control Bias
What is an example of self-control bias mentioned in the text?
Spending too high a percentage of income
What does Endowment Bias refer to?
Considering owned assets more valuable than others
Which behavioral economist coined the term 'Endowment Bias'?
Richard Thaler
What is another name for Endowment Bias as mentioned in the text?
"Divestiture Aversion"
What does the 'Anchoring Effect' caution against when making purchasing decisions?
Basing decisions on offered discounts without knowing the regular price
What is the common term used for the mental bias of dividing money into separate categories based on subjective criteria?
Two-Pocket Theory
Why is the mental accounting bias considered a 'fungibility violation'?
Because it categorizes money based on subjective criteria
How does separating accounts based on different goals influence spending decisions according to the text?
It manipulates decisions positively despite money being fungible
What cognitive limitation justifies the practice of mental accounting according to the text?
Brain's incapacity to systematically compare opportunity costs
Why do marketers advise against solely considering discounts when making purchasing decisions?
Because discounts may not reflect true savings if regular prices aren't known
Test your knowledge on 11 psychological and behavioral biases that influence human judgment and decision-making. Explore how filters of experiences create biases and affect decision-making processes based on rules of thumb rather than logic.
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