Behavioral finance terms

I have compiled a list of what I think are the most important behavioral finance errors that are likely to be tested. In the event that a list of choices is not provided on the exam, I will choose from this mental list. I have been looking through old exams, and it seems that the CFAI has changed the terminology for various behavioral traits over the years, so I have excluded terms that do not appear in the current curriculum (e.g. recallability, reference dependence, mental accounting). Please feel free to post a modified version of this list. - Representativeness - Overconfidence - Anchoring-and-adjustment - Aversion to ambiguity - Loss aversion - Self-control - Regret minimization - Money illusion - Pyramids - Naive diversification - Status quo bias - Endorsement effect - Familiarity bias - Home bias

  • house money effect - get even-itis - gamblers fallacy - self attribution bias - cognitive dissonance - hindsight bias - psychological call option - herding behaviour - mental accounting just to add some more to the list (some may be overlapping terms with similar interpretations)

Are you sure all of those are in the 2010 curriculum?

-Heuristics -Frame dependence -Emotion and cognition -Hedonic editing -Myopic loss aversion FML thats so many to remember

yes … each of them. either in schweser or in cfa. mostly the ones you have missed out are from CFA text.

Haha, well you can tell how I studied.

still a week’s time … get whatever u can lay your hands to … we are all doing that. :slight_smile:

Forget the Schweser terms… those specific words are not going to get you far on the test.

Don’t forget the forecasting traps (anchoring, status quo, confirming evidence, recallability, prudence, and the last one that I always forget). They are technically part of econ or capital markets expectations but the 2007 “behavioral finance” section was all forecasting traps.

overconfidence aimiee

SCRAPO for traps… or OCRAPS

Hahaha ocraps, I like it! Got a good one for the regular behavioral finance terms?

ROAA = Reference, Overconfidence, Aversion to Ambiguity, Anchoring