Is a subfield of psychology
Focused on how emotions and biases can affect decisions
States that there are errors in decision-making
States that people are NOT rational
Explains why investment bubbles, volatility and drastic movements in the stock market occur
Why Should I Care?
Psychological biases may cause you to make irrational decisions
By knowing these traps, you may be able to avoid them
In order to make the best financial decisions, there has to be rationality involved
Knowing how to overcome these biases can prompt the making of better investing and financial decisions
These are our must-read articles that we HIGHLY recommend will help you develop a strong foundation of behaviorism
Modern Portfolio Theory (MPT) is a constructed theory that calculates one's maximum returns given their amount of risk they are willing to take.
This theory is key to Portfolio Shepherd.
Behavioral Finance is one of the key categories that we offer.
This new field analyzes how psychology affects decisions and subsequently, outcomes.
When calculating returns according to the Modern Portfolio Theory, the understanding of the relationship between risk and return is critical
The Fear of Missing Out (FOMO) is something we all experience due to our fears of being regretful.
But why is it so detrimental?
The Efficient Market Hypothesis (EMH) is a theory that states people are rational and that markets are efficient.
But are all people rational and are all markets efficient?
Herding occurs when an individual, rather than using their own rational, follows a large group of people under the underlying assumption that others must be right.
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