Behavioral finance

Source: Wikipedia. Pages: 56. Chapters: Stock market bubble, Gambler's fallacy, Market trend, Sunk costs, Efficient-market hypothesis, Daniel Kahneman, Amos Tversky, List of cognitive biases, Behavioral economics, Risk aversion, Neuroeconomics, St. Petersburg paradox, Robert J. Shiller, Quantitative behavioral finance, Herd behavior, Equity premium puzzle, Hyperbolic discounting, Perth Leadership Outcome Model, Loss aversion, Allais paradox, Prospect theory, Information cascade, Behavioral analysis of markets, Keynesian beauty contest, Richard Thaler, Base rate fallacy, Fat tail, The Elliott Wave Theorist, Money illusion, Dumb agent theory, Endowment effect, Mental accounting, Choice architecture, Hersh Shefrin, Anecdotal value, McKellar algorithm, Post-earnings-announcement drift, Momentum, Journal of Behavioral Finance, January effect, Calendar effect, Status quo bias, Ostrich effect, Market anomaly, Greed and fear, Psychological level, Noisy market hypothesis, Identifiable victim effect, Disposition effect, Behavioral portfolio theory, Denomination effect. Excerpt: A cognitive bias is a pattern of poor judgment, often triggered by a particular situation. Identifying "poor judgment," or more precisely, a "deviation in judgment," requires a standard for comparison, i.e. "good judgment". In scientific investigations of cognitive bias, the source of "good judgment" is that of people outside the situation hypothesized to cause the poor judgment, or, if possible, a set of independently verifiable facts. The existence of most of the particular cognitive biases listed below has been verified empirically in psychology experiments. Cognitive biases, like many behaviors are influenced by evolution and natural selection pressure. Some are presumably adaptive and beneficial, for example, because they lead to more effective actions in given contexts or enable faster decisions, when faster decisions are of greater value for reproductive success and survival. Others presumably result from a lack of appropriate mental mechanisms, i.e. a general fault in human brain structure, or from the misapplication of a mechanism that is adaptive (beneficial) under different circumstances. Cognitive bias is a general term that is used to describe many distortions in the human mind that are difficult to eliminate and that lead to perceptual distortion, inaccurate judgment, or illogical interpretation. Many of these biases are studied for how they affect belief formation, business decisions, and scientific research. Many of these biases are often studied for how they affect business and economic decisions and how they affect experimental research. Most of these biases are labeled as attributional biases. Cognitive dissonance, and related: Heuristics, including: Introspection illusionAdaptive biasMisinterpretations or misuse of statistics. Reference class forecasting was developed by Daniel Kahneman, Amos Tversky, and Bent Flyvbjerg to eliminate or reduce the impact of cognitive biases on decision making.