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Market Psychology & Behavioural Finance

4 terms

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Market Psychology & Behavioural Finance

Familiarity Bias

Preferring investments one recognises, treating familiarity as a proxy for safety.

Test: the allocation favours known names or sectors without a corresponding analytical basis qualitative Market Psychology & Behavioural Finance

Fear

The emotional response to potential loss that leads investors to reduce exposure or avoid it entirely.

Test: exposure is reduced or avoided on the basis of recent price movement rather than on a changed assessment of the asset qualitative Market Psychology & Behavioural Finance

Fear of Missing Out

The anxiety of being left out of a rise that others are participating in, leading to purchases made without analysis.

Test: the decision to buy is triggered by others' gains rather than by any assessment of the asset's value qualitative Market Psychology & Behavioural Finance

Framing Effect

The tendency for a decision to change depending on how the identical information is presented.

Test: preferences reverse when the same outcome is described as a gain rather than as a loss, or in different units qualitative