Asked by Alina Avdeyev on Jun 25, 2024
Verified
Provide three categories of cognitive errors when making investment decisions. Expand on each category.
Cognitive Errors
Mistakes in reasoning, evaluating, remembering, or other cognitive activities, often occurring due to biases or logical fallacies.
Investment Decisions
The process of choosing among different investment alternatives and allocating resources to maximize shareholder value.
- Explore the outcomes stemming from different cognitive mistakes in investment and financial management.
Verified Answer
SG
sanchit gangwalJun 27, 2024
Final Answer :
Errors in reasoning are often called cognitive errors. They include such errors as: (1) biases, (2) framing effects, and (3) heuristics. These categories can be expanded further:
Biases: overconfidence, over-optimism, confirmation Bias.
Framing effects: loss aversion, house money.
Heuristics: the affect heuristic, the representativeness heuristic, representativeness and randomness, the gambler's fallacy.
Biases: overconfidence, over-optimism, confirmation Bias.
Framing effects: loss aversion, house money.
Heuristics: the affect heuristic, the representativeness heuristic, representativeness and randomness, the gambler's fallacy.
Learning Objectives
- Explore the outcomes stemming from different cognitive mistakes in investment and financial management.
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