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Market Psychology & Behavioural Finance

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Market Psychology & Behavioural Finance

Base Rate Neglect

Ignoring the underlying frequency of an outcome when assessing a specific case.

Test: a judgement uses case-specific detail while disregarding how often the outcome occurs in the relevant population % Market Psychology & Behavioural Finance

Behavioural Finance

The study of how psychological factors cause investors and markets to depart from purely rational decision-making.

Test: the observed behaviour departs systematically from what expected-utility maximisation would predict, in a documented and repeatable direction qualitative