Cognitive bias: Gambler’s Fallacy
You need to recruit a junior manager for your retail department. You know that a lot of people are qualified for this job, equally men and women. Today, you are supposed to…
Cognitive Bias: Familiarity bias
Do you prefer to bet on the decrease of the Dow Jones or the CAC40 on the first of next September? These questions have been asked in many economic experiments…
Cognitive Bias: Thinking Fast and Slow …
Cognitive Bias: Thinking Fast and Slow…
Cognitive Bias: Base Rate Fallacy
If a test to detect a disease whose prevalence is 1/1000 has a false positive rate of 5%, what is the chance that a person found to have a positive…
Cognitive Bias: The framing effect
You are the head of an industrial company operating 600 plants with severe economic problems. After discussion with your strategic
Behavioral finance, risk profiling and Prospect Theory
Prospect Theory is one of the most famous behavioral finance theory. It describes how investors make decision under risk. A short insight in this article.
Cognitive Bias: ambiguity aversion
As an investor, you have three investment options for the next semester: You get €500.000 for sure You invest in a stock with a 50% of chance of earning €1M…
Risk profiling, financial risk and behavioral finance
Risk tolerance, risk profile, risk appetite, risk capacity... what are the differences? In financial theories, financial risk is a mathematical number, like volatility, that determines the level uncertainty (potential gains…
Behavioral finance: understanding investor preferences to sell better and more
Behavioral finance theories are interesting in many respects, but they are also very useful for understanding how investors position themselves. What is their relationship to risk? What types of products…
Introduction to behavioral economics
The objective of behavioral economics is to model and quantify psychological factors which affect our financial decisions, such as emotions, misperceptions, and cognitive biases.