Market Psychology & Behavioural Finance

The tendency to prefer doing something over doing nothing, even when action has no expected benefit.

Test: activity is undertaken without evidence that it improves the expected outcome qualitative

The inability to reach a decision because of excessive information gathering and deliberation.

Test: additional information is sought after the point at which it stops changing the decision qualitative

Market Psychology & Behavioural Finance

The tendency to rely too heavily on an initial reference number when making subsequent judgements.

Test: estimates shift systematically toward an arbitrary starting value that carries no information about the answer qualitative

Market Psychology & Behavioural Finance

Keynes's term for the instinctive optimism that drives economic and investment activity beyond what calculation justifies.

Test: investment and risk-taking rise or fall more than changes in measurable expected returns can explain qualitative

Market Psychology & Behavioural Finance

Assigning greater weight to an opinion because of who expressed it rather than because of its evidence.

Test: the persuasiveness of a claim rises with the speaker's status, independent of the reasoning offered qualitative

Market Psychology & Behavioural Finance

The tendency to judge probability by how easily examples come to mind rather than by actual frequency.

Test: perceived likelihood tracks the vividness and recency of remembered examples rather than base rates qualitative