Market Psychology & Behavioural Finance

The tendency to weight recent events more heavily than older ones when forming expectations.

Test: expectations track the most recent period's outcomes rather than the full available history qualitative

Avoiding decisions because of the anticipated pain of regret if they turn out badly.

Test: the choice minimises anticipated regret rather than maximising expected outcome qualitative

Market Psychology & Behavioural Finance

Judging probability by how closely something resembles a mental prototype, rather than by statistical likelihood.

Test: the judgement follows similarity to a stereotype and ignores how common that category actually is qualitative

Market Psychology & Behavioural Finance

The preference for a certain outcome over an uncertain one with the same expected value.

Test: the certainty equivalent accepted is less than the gamble's expected value qualitative

Market Psychology & Behavioural Finance

Preferring an uncertain outcome to a certain one of the same expected value, typically when facing losses.

Test: the gamble is preferred to a certain outcome of equal or higher expected value, usually in the loss domain qualitative