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

The tendency to credit successes to one's own skill and failures to external circumstances.

Test: favourable outcomes are attributed internally and unfavourable ones externally, regardless of the actual process quality qualitative

Market Psychology & Behavioural Finance

The tendency to treat the actions of others as evidence about what is correct.

Test: the strength of a belief rises with the number of people observed holding it, independent of any new evidence qualitative

Market Psychology & Behavioural Finance

The preference for leaving things as they are, treating inaction as safer than action.

Test: the current arrangement is retained even when an alternative would be chosen if the positions were reversed qualitative

Market Psychology & Behavioural Finance

Continuing with a course of action because of resources already committed, rather than because of expected future returns.

Test: the decision to continue references money, time or effort already spent, which cannot be recovered by continuing qualitative

Market Psychology & Behavioural Finance

Drawing conclusions from a sample that includes only the entities that survived, omitting those that failed.

Test: the dataset excludes delisted, merged or closed entities, so the surviving sample's average overstates the true population average %

Market Psychology & Behavioural Finance

The emotional and cognitive discipline required to follow a plan under uncertainty and financial pressure.

Test: decisions taken under pressure match the rules set in advance, rather than being renegotiated in the moment qualitative