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Market Psychology & Behavioural Finance

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Market Psychology & Behavioural Finance

Omission Bias

Judging harmful actions as worse than equally harmful failures to act.

Test: an identical outcome is judged more acceptable when it results from inaction than from action qualitative Market Psychology & Behavioural Finance

Optimism Bias

The tendency to expect better outcomes for oneself than the base rate justifies.

Test: personal probability estimates for favourable outcomes exceed the observed frequency in the relevant population qualitative Market Psychology & Behavioural Finance

Outcome Bias

Judging the quality of a decision by how it turned out rather than by the information available when it was made.

Test: two identical decision processes are evaluated differently solely because their outcomes differed qualitative Market Psychology & Behavioural Finance

Overconfidence Bias

The tendency to overestimate one's own knowledge, judgement or ability to predict outcomes.

Test: stated confidence intervals are too narrow, so outcomes fall outside them far more often than the stated confidence implies qualitative