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Anchoring and adjustment bias. The price at which you bought a stock is irrelevant.
Anchoring and adjustment bias is the tendency to interpret new information based on an arbitrary anchor and adjust opinions accordingly. It can lead to forecasts too close to current levels and inflexible views. Discover whether you are prone to an anchoring and adjustment bias and how it affects your investment decisions with PRAAMS BehaviouRisk.
Conservatism bias. Being stubborn may help in everyday life but not in asset allocation.
Conservatism bias is a tendency to stick to prior views or forecasts and to underreact to new information. Investors may cling to outdated data, resulting in slower adaptation and potential losses. Discover whether you are prone to a conservatism bias and how it affects your investment decisions with PRAAMS BehaviouRisk.
Availability bias. Be afraid of coconuts, not sharks.
Availability bias is the tendency to consider events more likely if they are easier to recall. It can lead investors to make investment decisions based on readily available information, such as advertising or personal beliefs. Discover whether you are prone to an availability bias and the extent to which it affects your investment decisions with PRAAMS BehaviouRisk.
Hindsight bias. Was the market correction of 2022 a negative surprise for your asset allocation strategy, or did you ‘know it all along’?
Hindsight bias is a cognitive bias whereby people believe they could have predicted an outcome after it occurs. It can lead to excessive risk-taking and hinder learning from past mistakes. Discover whether you are prone to a hindsight bias and the extent to which it affects your investment decisions with PRAAMS BehaviouRisk.
Outcome bias. A ‘hot’ trade idea may be just a bubble about to burst.
Outcome bias is a cognitive bias where decisions are based on outcomes rather than underlying factors. Investors often make this mistake and buy risky stocks. To counteract this bias, research investments thoroughly, seek professional advice, and consider factors like diversification and risk exposure. Discover whether you are prone to an outcome bias and the extent to which it affects your investment decisions with PRAAMS BehaviouRisk.
Framing bias. Your risk appetite is manipulated by how the broker’s questionnaire is worded.
Framing bias refers to the tendency to respond differently based on the context or presentation of a situation. It can affect decision-making in financial markets, including risk profiling questionnaires. Discover whether you are prone to a framing bias and the extent to which it affects your investment decisions with PRAAMS BehaviouRisk.
Self-attribution bias. Not all successful trade ideas are thanks to your genius, and not all failures are due to external risk factors.
Self-attribution bias leads individuals to attribute success to internal factors and failure to external factors. It can result in overconfidence, poor learning from mistakes, excessive risk-taking, and lower investment returns. Discover whether you are prone to a self-attribution bias and the extent to which it affects your investment decisions with PRAAMS BehaviouRisk.
Regret aversion bias. Complete avoidance of investment risks is as harmful as excessive risk-taking.
Regret aversion bias causes investors to make wrong decisions out of fear of regret. They may hold onto losing positions or avoid selling winners, leading to irrational and risky behaviour. Discover whether you are prone to a regret aversion bias and the extent to which it affects your investment decisions with PRAAMS BehaviouRisk.