Investing Psychology: The Effects of Behavioral Finance on Investment Choice and Bias (Tim Richards, 2014)

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  • Muller-Lyer illusion - bias blind spot
  • Pareidolia - a phenomenon in which the mind responds to a stimulus by perceiving a familiar pattern where none exists
  • Investment superstition - it will fail as soon as you really need them to work
  • Super bowl effect - market movement based on totally irrelevant events
  • Barnum effect - vague fact that can be applied to anything or anyone
  • Do not create imaginary effect just to proof the market movement - market is uncertain
  • Never believe people who can predict the stock market in short term
  • Herding - monkey see monkey do
  • Blind-spot bias - people believed they would find the inner strength to resist and stop bad things from happening
  • Treat every golf shot with the same seriousness - every investment decision on its own merits
  • Market is a zero sum game - if one win someone else lose
  • People are around to exploit our confusion that we suffer between situation and disposition
  • People will travel to save $5 for a small ticket item than same $5 for a big ticket item
  • Mutual funds are very clever at manipulating historical data to make their performance look better than it really is
  • Texas sharpshooter effect - shoot a place and draw circles the target on it
  • The rule of 7 - we can only deal with 7 chunks of information


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