FINA 3303 Study Guide - Midterm Guide: Risk-Free Interest Rate, Technical Analysis, High-Yield Debt
31 Mar 2016
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Overconfidence people tend to overestimate the precision of their beliefs or forecasts and they tend to overestimate their abilities. Conservatism a conservatism bias means that investors are too slow in updating their beliefs in response to new evidence. Resulting in prices only gradually reflect new information. Sample-size neglect and representativeness representativeness bias holds that people szeecommonly do not take into account the size of a sample, acting as if a small sample is just as representative of a population as a large one. Framing decisions are affected by how choices are posed for example as gains relative to a low baseline level or losses relative to a higher baseline. Regret avoidance individuals who make decisions that turn out badly have more regret when that decisions was more unconventional. Prospect theory behavioral theory that investor utility depends on gains or losses from investors starting position, rather than on their levels of wealth.
