Behavioral Finance

Key Concepts

Bias - A predisposition towards error.

• w:Excessive Optimism - Overestimating the frequency of experiencing favorable outcomes and underestimating the frequency of experiencing unfavorable outcomes.
• w:Winner's curse - Winners of auctions tend to overpay.
• Overconfidence
• Confirmation Bias
• Illusion of Control
• Heuristics
• Representativeness
• Availability
• Anchoring
• Loss Aversion
• Aversion to Sure Loss
• Framing

Prospect Theory - [[[Wikipedia:Prospect theory|Wiki Link]]] - [Original Paper]

Key Researchers

Daniel Kahneman
Amos Tversky

Suggested Textbooks

Behavioral Corporate Finance, Hersh Shefrin, 2007, ISBN 978-0-07-284865-6
Behavioural Finance, James Montier, 2002, ISBN 978-0-470-84487-8