Anchoring Bias: Anchoring bias occurs when individuals rely too heavily on the first piece of information they receive when making decisions.
Confirmation Bias: Confirmation bias is the tendency to focus on information that supports existing beliefs while ignoring contradictory data.
– Overconfidence: Overconfidence happens when individuals overestimate their knowledge or ability, leading to risky financial decisions. –
Fear & Greed: Fear and greed are emotions that drive impulsive financial decisions, causing people to sell in downturns or buy in booms.
Regret Aversion: Regret aversion is the fear of making decisions that could lead to future regret, often leading to inaction.
Mood Impact: Mood impact refers to how emotional states influence risk tolerance and financial choices.
– Mental Accounting: Mental accounting is when people categorize money differently based on its source or intended use, which can lead to irrational spending or saving. –
Herd Behavior: Herd behavior occurs when individuals follow the actions of others rather than making independent decisions.
Peer Pressure: Peer pressure in finance leads individuals to make choices influenced by the spending or investment behaviors of their social group.
Time Preferences: Time preferences refer to how individuals value immediate rewards compared to future benefits when making financial decisions.