Nudge

How a situation or question is proposed can influence what people think of it. People react differently to “If you quit smoking, you will live longer” than to “If you don’t quit smoking, you will die sooner.” Although both statements provide the same information,...

Investor Behavior

How investors behave can affect both their portfolio performance and the overall market. Because of a lack of formal training, limited experience, or personality traits, investors don’t always make decisions that are consistent with their stated financial goals. Their decisions often are impulsive and...

Cognitive Ability

Billionaire investor Warren Buffett is known for his pithy insights. He once observed that in finance “you don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” He also...

Emotional Biases and Social-​Cultural Influences

Have you ever made an investment decision based on how you feel about a company, its products, or its leadership? If so, you may suffer from an emotional bias, which is a distortion in perception and decision-​making due to emotional factors. It...

Cognitive Biases

People are prone to errors and biases that influence their decision-​making. These mistakes can lead to bypassing rational thinking and relying on preconceived notions or intuition. Some biases are “hardwired” into the brain. Combining different behavioral biases can create a dangerous mixture that, if...

Foundations and Psychological Concepts

Historically, those traveling the financial highway were taught to follow a single route. Travelers were told that as long as everyone faithfully followed directions and weather conditions were ideal, the road would be their best choice and they would get to their intended destination....