Search results
Results From The WOW.Com Content Network
The Behavior Portfolio Theory governs that investors are "normal" [12] and cannot always make rational decisions due to their cognitive and emotional biases. The field of behavioral finance defines several biases and heuristics that offer insight into individual behavior and how these biases influence an individual's investment decisions.
An emotional bias is a distortion in cognition and decision making due to emotional factors. For example, a person might be inclined: to attribute negative judgements to neutral events or objects; [1] [2] to believe something that has a positive emotional effect, that gives a pleasant feeling, even if there is evidence to the contrary;
Behavioral finance [74] is the study of the influence of psychology on the behavior of investors or financial analysts. It assumes that investors are not always rational , have limits to their self-control and are influenced by their own biases . [ 75 ]
The Barnewall Two-way Model, also known as the Barnewall Two-way Behavioral Model, is an investor psychographic profiling model. [ 1 ] [ 2 ] The Barnewall Two-way model was initially conceptualized and proposed by Marilyn MacGruder Barnewall in 1987 in an academic paper titled Psychological Characteristics of the individual investor. [ 3 ]
The influence, they note, has been recorded in all the broad individual investor trading activity databases available and has been linked to significant pricing phenomena such as post-earnings announcement drift and momentum at the stock level. In other conditions, for example in the real estate market, disposition effects were also discovered. [5]
The somatic marker hypothesis (SMH), formulated by Antonio Damasio, proposes a mechanism by which emotional processes can guide (or bias) behavior, particularly decision-making. [9] [10] Emotions, as defined by Damasio, are changes in both body and brain states in response to different stimuli. [11]
Behavioral game theory seeks to examine how people's strategic decision-making behavior is shaped by social preferences, social utility and other psychological factors. [1] Behavioral game theory analyzes interactive strategic decisions and behavior using the methods of game theory , [ 2 ] experimental economics , and experimental psychology .
Regret aversion is not only a theoretical economics model, but a cognitive bias occurring as a decision has been made to abstain from regretting an alternative decision. To better preface, regret aversion can be seen through fear by either commission or omission; the prospect of committing to a failure or omitting an opportunity that we seek to ...