Investors Behavior- Investors with Different Types of Behavior

Investors Behavior- Investors with Different Types of Behavior

• Overconfidence and overoptimism—investors overestimate their ability and the accuracy of the information they have
• Representatives—investors assess situations based on superficial characteristics rather than underlying probabilities.
• Conservatism—forecasters cling to prior beliefs in the face of new information.
• Availability bias—investors overstate the probabilities of recently observed or experienced events because the memory is fresh.
• Frame dependence and anchoring—the form of presentation of information can affect the decision made.
• Mental accounting—individuals allocate wealth to separate mental compartments and ignore frangibility and correlation effects.
• Regret aversion—individuals make decisions in a way that allows them to avoid feeling emotional pain in the event of an adverse outcome.
• Behavioral finance also challenges the use of conventional utility functions based on the idea of risk aversion.