Behavioral Finance

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Key Concepts[edit]

Bias - A predisposition towards error.

  • w:Excessive Optimism - Overestimating the frequency of experiencing favorable outcomes and underestimating the frequency of experiencing unfavorable outcomes.
  • w:Winner's curse - Winners of auctions tend to overpay.
  • Overconfidence
  • Confirmation Bias
  • Illusion of Control
  • Heuristics
  • Representativeness
  • Availability
  • Anchoring
  • Loss Aversion
  • Aversion to Sure Loss
  • Framing


Prospect Theory - [[[Wikipedia:Prospect theory|Wiki Link]]] - [Original Paper]

Key Researchers[edit]

Daniel Kahneman
Amos Tversky

Suggested Textbooks[edit]

Behavioral Corporate Finance, Hersh Shefrin, 2007, ISBN 978-0-07-284865-6
Behavioural Finance, James Montier, 2002, ISBN 978-0-470-84487-8