Behavioral finance terms

CFA Level III
#1

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

#2
  • 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)
#3

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

#4

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

#5

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

#6

Haha, well you can tell how I studied.

#7

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

#8

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

#9

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.

#10

overconfidence aimiee

#11

SCRAPO for traps… or OCRAPS

#12

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

#13

ROAA = Reference, Overconfidence, Aversion to Ambiguity, Anchoring