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BEHAVIORAL FINANCE (INVESTMENT PROCESS (PORTFOLIO CONSTRUCTION…

- - - - BBK 5-way model
        
        Aventurer: Confidence + Impetous
        
        Celeb: Anxious + Impetous
        
        Individual: Confidence + Careful
        
        Guardian: Anxious + Careful
        
        Straight Arrow: Average
      - Pompian Model
        
        Active Accumulator: High risk tolerance + Emotional
        
        Passive Preserve: Low risk tolerance + Emotional
        
        Friendly Follower: Low risk tolerance + Cognitive
        
        Independant Individual: High risk tolerance + Cognitive
  - - - familarity and overconfidence
      - naive extrapolation of past results
      - Framing and status quo effect of matching contribution
      - Loyalty effect
      - Financial incentives
    - - Over confidence
      - Self selection
      - Disposition effect due to Loss aversion
  - - - Illusion of knowledge
      - Illusion of control
      - Representativeness
      - Ego Defense mechanism
        
        Self atribution
        
        Self enhancing
        
        Self protecting
      - Hindsight
        
        Self Calibration
      - Availability
    - - Framing
      - Anchoring and Adjustment
      - Availability
      - Self attribution
    - - Confirmaition
      - Gambler's fallacy
  - - - Herding
        
        Availability
        
        Fear of regret
        
        Trend chasing
    - - Halo
        
        Representitiveness
      - Home bias
- - - - Illusion of control
        
        Illusion of knowledge
        
        self attribution
        
        Overconfidence
      - Hindsight
        
        selective memory
      - Representativeness
        
        past will persist, new info is based on past experience
        
        Base rate neglect
        
        Sample size neglect
      - Confirmation
        
        Seeking for supportive info
      - Conservatism
        
        fail to change inital view
    - - Anchoring and adjustment
        
        Change is not enough
      - Mental accounting
        
        Money treated depending on category
      - Framing
        
        decision based on framing
      - Availability
        
        Focus on available info
  - - - more pain from loss than pleasure form gain
      - Myopic loss aversion: short term risk = high premium
    - - Illusion of knowledge
      - self attribution
        
        self enhancing
        
        self protecting
      - Self control
        
        favor immediate spending over long term goal
      - Status quo
        
        unwillingness to change
      - Endowment
        
        asset is more valuable because it is inherited
      - Regret aversion
        
        fear that actions could be wrong
        
        commision
        
        ommision
        
        herding behavior
  - - - Pyramid : Essential - Market - Aspirational
    - - Level of wealth
      - Bias type (Cognitive or emotional)