Behavioral Finance
Why investors act against their own interest, the biases that move prices and wreck returns.
Recommended first: Foundations of Markets
Tick lessons off as you go, saved in this browser, no account needed.
- 1Prospect Theory
How we weigh risk
Prospect Theory: The Model Behind Real Investment Decisions
- 2Loss Aversion
Losses hurt more
Loss Aversion: Why Losses Hurt More Than Gains Help
- 3Confirmation Bias
Seeking agreement
Confirmation Bias: How Investors Filter Out the Bear Case
- 4Anchoring
Stuck on a number
Anchoring Bias: How First Numbers Distort Investment Decisions
- 5Herding
Following the crowd
Herding Behavior: How Crowds Overwhelm Private Information
- 6Overconfidence
Knowing too much
Overconfidence Bias: The Costly Mistake Most Investors Make
- 7Disposition Effect
Selling winners
Disposition Effect: Selling Winners Early, Holding Losers Too Long
- 8Recency Bias
Latest = likeliest
Recency Bias: Why Investors Chase Last Year's Winners
- 9Mental Accounting
Money in buckets
Mental Accounting: Why Investors Treat Identical Dollars Differently
- 10Sunk Cost
Throwing good money
Sunk Cost Fallacy: Why Past Losses Shouldn't Drive Future Decisions
- 11Availability
What's top of mind
Availability Heuristic: Why Vivid Events Distort Risk Estimates
- 12Framing
How it's presented
Framing Effect: How Wording Changes Investment Decisions
- 13Hindsight
Knew it all along
Hindsight Bias: Why Past Outcomes Always Seem Obvious in Retrospect
- 14Narrative
Story over data
Narrative Fallacy: How Stories Masquerade as Market Analysis
- 15Endowment
Overvaluing what's ours
Endowment Effect: Why You Overvalue What You Already Own