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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.


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