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.