Bias
 |
Definition of 'Bias'Biases are human tendencies that lead us to follow a particular quasi-logical path, or form a certain perspective based on predetermined mental notions and beliefs. When investors act on a bias, they do not explore the full issue and can be ignorant to evidence that contradicts their initial opinions. Avoiding cognitive biases allows investors to reach impartial decision based solely on available data. |
 |
Investopedia explains 'Bias'Some common psychological biases plaguing investors include: representative bias, cognitive dissonance, home bias, familiarity bias, mood and optimism, overconfidence bias, endowment effects, status quo bias, reference point & anchoring, law of small numbers, mental accounting, disposition effects, attachment bias, changing risk preference, media bias and internet information bias. |
Related Definitions
Articles Of Interest
-
An Introduction To Behavioral Finance
Curious about how emotions and biases affect the market? Find some useful insight here. -
Using Logic To Examine Risk
Know your odds before you put your money on the table. -
How The Power Of The Masses Drives The Market
Market psychology is an undeniably powerful force. Find out what you can do about it. -
How To Break Bad Trading Habits
It isn't making money on each trade that counts, but developing a long-term plan that works. -
Trading Psychology: Consensus Indicators - Part 2
Professional market players are some of the best models for the individual small trader to mimic. -
Brains Don't Always Bring The Bucks
Common mistakes can prevent even the smartest investors from beating the market. -
Pay Attention To The Proxy Statement
Don't overlook this overview of a company's well-being. -
Explaining Amortization In The Balance Sheet
Amortization is important to account for intangible assets. Read to find out more about amortization. -
The Nash Equilibrium
Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium ... -
Pitfalls Of Copycat Investing
While it may sound good in theory to attempt to mimic the investment style and profile of a successful institution, it is often much harder (if not impossible) to do so in practice.
Free Annual Reports