Category: BEHAVIORAL FINANCE

Anchoring and Adjustment Bias: Definition, Index, Examples, Effect in Finance and Investing

Anchoring and Adjustment bias, a cognitive phenomenon deeply ingrained in human decision-making, exerts a profound influence on how individuals assess probabilities and make judgments. This blog post embarks on an exploration of Anchoring and Adjustment bias, delving into its mechanism, impact on financial decisions, and the critical concept of the …

Immanuel Kant and Kantian Ethics

Immanuel Kant, an influential 18th-century philosopher, left an indelible mark on the world of moral philosophy with his groundbreaking ideas on ethics. Kant’s ethical framework, known as Kantian Ethics, emphasizes the significance of moral duty, universal principles, and the intrinsic value of human beings. In this blog post, we will …

The Friendship and Enmity Paradoxes

The friendship paradox is a phenomenon in social network analysis that states that, on average, individuals tend to have fewer friends than their friends have. This paradox arises from the inherent structure of social networks, where popular individuals with a large number of friends are more likely to be included …

Why Do Investors Lose Money?

Behavioural finance is the study of how financial behaviour affects economic decisions and market outcomes, and how those decisions and outcomes are affected by psychological, social, and cultural factors. It is a relatively new field that combines elements of economics, psychology, and sociology. Behavioural finance research has shown that people …

Selection Bias vs Sampling Bias

A bias occurs when users use irrational preferences in their work. Usually, it happens unintentionally. Nonetheless, it can impact their work and decision-making significantly. Biases may exist in various areas of life. Some of these may apply when individuals select an item from a given population. In that area, two …

Selection Bias: How It Affects Our Lives

Human psychological bias affects us in many different ways. We have recently discussed how recency bias influences our trading. In this post, we’re going to talk about selection bias. Selection bias occurs when a statistical sample is not representative of the entire population. This situation arises, for example, when a …

Recency Bias: How It Affects Your Trading

Trading is a difficult endeavor, and the main reason most traders fail is that they don’t have an edge. The expectation value of most trading strategies is zero before commissions and slippage. Taking commissions and slippage into account, trading is a negative-sum game. Even with a positive expectancy trading system, …