There are a lot of biases in CFA Level 3. I tried to list them all. Did I miss any?
Cognitive Errors
Belief Perseverance Biases 1. Representativeness Bias 2. Illusion of Control Bias 3. Conservatism Bias 4. Confirmation Bias 5. Hindsight Bias
Information-Processing Biases
Framing Bias 2. Anchoring and Adjustment Bias 3. Mental Accounting Bias 4. Availability Bias
Emotional Biases
Loss Aversion Bias 2. Overconfidence Bias 3. Self-Control Bias 4. Endowment Bias 5. Regret Aversion Bias 6. Status Quo Bias
Capital Markets Expectations Biases
Appraisal Bias 2. Regime Switching Bias 3. Data Mining Bias 4. Time-Period Bias 5. Survivorship bias 6. Prudence trap 7. Disposition Effect 8. Halo Effect 9. Gamblers fallacy 10. Anchoring trap 11. Recallability Trap 12. Confirming evidence trap 13. Over confidence trap 14. Status Quo Trap 15. Home Bias 16. Look-back bias 17. Familiarity bias 18. Self attribution bias 19. Self-control bias 20. Stale price bias
Conjunction fallacy + Social Proof
1 Like
I think this list pretty complete. There’s actually a few on here that I think I might have pissed. Like the stale price and look-back bias.
Conjunction Fallacy: “The probability of two independent events occurring in conjunction is never greater than the probability of either event occurring alone.” - CFA Level III Curriculum
Aversion to ambiguity bias…you’ll find this one as well somewhere…
good one, i came across it somewhere before, i think this one is tested in one of the official cfa exercise questions
The most difficult ones to remember for me are:
Representativeness bias - belief perseverance bias in which people tend to classify new information based on past experiences (cognitive)
Availability bias - information processing heuristic approach in estimating probabilities of outcomes (cognitive)
Halo effect - emotional bias of extending positive evaluation of some characteristics over others
Self control bias - tendency to spend today rather than tomorrow (emotional bias)
Mental accounting - treating one some of money differently to same sum of money based on which mental account it is assigned to
Endowment bias - emotional bias, when you value the asset more only when you own it
Conjunction fallacy - inappropriately combining probabilities of independent events to support a belief
Disposition effect - emotional bias whereby investors dispose of winners and keep the losers
Time period bias - choosing short term time period to support a particular view
Regime switching bias - A bias caused by critical events that make differences between two regimes
Appraisal bias - smoothing returns as you appraise instead of use market values
I think it depends on context of such “social acceptable behavior”.
Herding syndrome = the common bias on stock market.
Social proof = common bias elsewhere when looking for support (aka confirmation) for already decided action.
forgot the affinity bias = being biased towards “people who make me comfortable” or “people who are like me,”
What’s strange is, many biases have similar/ same meaning but different names. Why this terminology craze?
because the biases were kind of all over the place in the official books i just wanted to get them all in one place for revision
Right, and you’ve done us a big service for the exam, thanks.
My question was more from the curriculum’s point of view.
Edbert
March 25, 2018, 4:54am
#14
a tutor suggested that CFA gets the contents of their curriculum from multiple literatures and journals.
These sources might discuss pretty much the same things but use different terminologies from one and another. CFA, for the purpose of just being cautious, includes them all.
In a sense, when we read the curriculum, we’re pretty much reading from hundreds of journals or books.