What is Mental Accounting Bias? Mental accounting is a process that individuals use to assign subjective values to their money. However, these values go against the accepted economic principles. Mental accounting is a concept that comes from behavioural economics. Often, people tend to place varying values on the same amount …

In finance and investing, making accurate predictions based on certain factors is critical. If an investor makes the correct prediction, they can expect high returns. However, wrong forecasts can also be vital, as they can cause losses. There are several factors that may influence whether someone makes the correct predictions. …

What is the Illusion of Control Bias? The illusion of control bias is a type of bias in behavioural finance that gives people the illusion of control. People that inherit this behaviour tend to overestimate the power or control they have over a circumstance. Therefore, they tend to think they …

Behavioural finance refers to the study of psychological influences and biases that affect the behaviour or decisions of investors. It also studies how these influences affect the market. One of the primary areas in behavioural finance is the study of biases. A behavioural bias is an irrational belief that can …

Behavioural finance is a field of behavioural economics that deals with the psychological influences and biases that affect investors. These biases exist in the decisions that investors make and can cause them to make the wrong choices. There are several types of biases that investors may face during their investing …

What is Adaptive Market Hypothesis? The adaptive market hypothesis (AMH) comes from the works of Andrew Lo from 2004. This hypothesis brings together the principles of the efficient market hypothesis (EMH) and behavioural finance. It does so by applying the principles of evolution to financial interactions. These principles include adaptation, …

What is the Utility Theory in Economics? Utility theory is a theory in economics that emphasizes individuals’ choices. This theory explains the behaviour of individuals based on the idea that people make choices based on preferences. Each individual has a different preference. Thus, everyone will make personalized decisions. These preferences …

The use of computers in the field of finance and investing has become more prevalent. Like many other fields, the concept of artificial intelligence has also had its applications in these fields. One such way that computers have changed the investing world is the introduction of algorithmic trading. This process …

What is High-Frequency Trading? High-Frequency Trading (HFT) refers to a method of trading used by investors. This method involves using computer software to buy or sell large numbers of stocks or securities in a short time. Due to this characteristic, it gets the name high-frequency trading. Investors can use algorithmic …

What is the Volume-Weighted Average Price? The volume-weighted average price (VWAP) represents a stock’s average price, weighted based on the total trading volume. Usually, investors use it to determine the average price that the stock has traded on the stock market for a day. The volume-weighted average price considers two …