Could someone be so kind and remind me what behavioral biases we may encounter here. I dont have access to books at this moment. I would say overconfidence, familiarity, ilusion of control, status quo. Something else?
Endowment too mate - Valuing something more than actually its worth for in the market.
- loyalty + naive extrapolation
ok, thanks guys. loyalty effects and naive extrapolation of past returns was what I couldnt remember. endowment certainly makes sense, especially when someone inherits large position in certain stock.
FOS-NEL easy to remember for arabic speakers lol (familiarity, overconf, status quo, naive div, endowment, loyalty)
CACI This one too (conserv confir illusion of control anchor)
This is my list, explanations in brackets for those I have difficulty remembering: Cognitive Errors stemming from believe perseverance
- Conservatism bias (People maintain their prior views or forecasts by inadequately incorporating new information)
- Confirmation bias
- Representativeness bias
- Illusion of control bias
- Hindsight bias
Cognitive Errors stemming from processing errors - Anchoring and adjustment (The tendency to continue using information that had been used in past decisions despite the availability and relevance of new information)
- Mental accounting bias
- Framing bias
- Availability bias
Emotional bias - Loss aversion bias
- Overconfidence bias
- Self-control bias
- Status quo bias
- Endowment bias (People value an asset more when they hold the rights to it than when they do not)
- Regret-aversion bias (The influence of past decisions (associated with poor investment performance) on similar choices in the present. Often, rational actions are not taken in order to avoid a recurrence of the regret experienced after the past decisions)
Thanks, but those in concentrated study session are slightly different like: loyalty effects or naive extrapolating of past returns. I think that is highly possible that this year they will throw at us concentrated position item set combined with behavioral biases in the am session. i will be preparing for that.
^^ we’re referring to the ones mentioned in the concentrated position reading.
Guys, from what you write I guess there are two lists of behavioural biases? One for usual investors and the other for concentrated-position investors? That seems weird…
IMO those biases can come up everywhere and depend on particular case. Chapters in the book were written by differen peolpe who name those biases differently. Maybe there are some new ones, but we cannot categorize them in 2 different groups (a kind of mental accounting:))
familiarity, ilusion of control, especially loyalty are mainly for concentrated position.
lol kobi. Yea I think certain biases relate to certain types of concentrated positions too. For example-guy owns a business that he plans to sell and then retire - likely to exhibit endowment and expect to get more for the biz than is reasonable. Someone who accumulated a ton of employer stock is at risk to have illusion of control bias. I should check this other list of biases tho…don’t recall it at all.
Little trick to remember, easier if you speak french
NOELS (Noel means christmas en french, and add a S)
Naive Diversification
Overconfidence
Endowment
Loyalty effects
Status quo bias