Daniel Kahneman

M11EFA BEHAVIOURAL FINANCE COURSEWORK Name: Thi Thanh Van Mai Student ID: 6026628 What contribution can behavioural finance make to the explanation of stock market bubbles and crashes? Table of Contents I. Introduction 3 II. The behavioral finance paradigm and its derived explanations of the investors’ beliefs 3 III. Behavioral Theories used in the finance markets 4 IV. Empirical Evidences in the stock markets 6 V. Conclusion 7 VI. References 8 I. Introduction There

In Uruguay, between one out of three and one out of four children that enroll in secondary school do not graduate. For a country that used to exhibit high education levels and more than tripled its education expenditure per student in the last ten years, being just above Latin American standards appears as anything but a success. Several studies dug in the cause and nature of such an evolution. One particular finding called for the attention of researchers: the probability of an adolescent leaving

knowing what is going to happen; this is why certainty is absurd. In his essay The Surety of Fools, Daniel Kahneman provides examples of people using a phenomenon he calls the illusion of validity. These people strongly believe their actions cause a specific outcome, when in reality there is statistical evidence that shows their actions have no direct correlation with the outcome.While Kahneman argues the illusion of validity comes partially from people’s tendency to make quick decisions without

1Why has there been so much fuss about New York City’s attempt to impose a soda ban,1 or more precisely, a ban on large-size “sugary drinks”? After all, people can still get as much soda as they want. This isn’t Prohibition. It’s just that getting it would take slightly more effort. So, why is this such a big deal? 1 soda ban In 2013, New York City passed a law prohibiting soda containers larger than 16 ounces in volume. The New York State Court of Appeals later overturned the law. 2 Obviously

Behavioural economics is the study of the effects that psychology has on the decision making of the economy. This tends to be the way that people think and feel when they are spending money on a certain good or service. The great economist Adam Smith was the first follower of this idea through his book “The theory of moral sentiments” which dates back to 1759. However, it took over 100 years to get a more clarified meaning of how big of a role the psychology of a buyer plays in economics. In behavioural

There are four different rules of heuristics in social psychology – representative heuristics, availability heuristics, anchoring and adjustment heuristics, and finally status quo heuristics. Often people employ heuristics to come to conclusions about a topic rather quickly than sitting and taking their time to go through the standard notions of problem- solving to finally make a decision. A heuristic is a judgement that may conclude in a probable answer, but may not always be the exact answer overall

There are many cognitive biases that affect the analytic process and inhibit analysts from reaching the height of their accuracy. Each of these cognitive biases affect thinking in a unique way, but there are different techniques that can be used to overcome these biases. Most of the time cognitive biases are not intentional which is why it is so important that measures are taken to reduce the effect of cognitive biases. Structured Analytic Techniques effectively reduce the effect of cognitive

In this reflection journal, we were asked to take a decision-making quiz on biases that we may have. I was surprised with a few that I possess. The rush to solve and the anchoring and adjustment heuristic are the two that I tested positive for on the quiz. While I read the reasoning for the decision-making quiz, I recalled my logic and critical reasoning class that I had before that discussed bias in argument. However, it was surprising to see that I committed these biases on the quiz, even if I

Introduction In the psychology field, availability heuristic is a mental shortcut that relies on immediate examples that come to mind. The replicated study was conducted by Tversky and Kahneman in 1973 “Judgment under Uncertainty: Heuristic and Biased”, the study was biased in judgments to reveal some heuristic of thinking under certainty. This study was significant because it helps us understand the brain more. In order to investigate availability the experiment presented four lists to the participants

RSM100 Required Readings Summaries Nov. 23 - The Discipline of Teams * Teams and good performance are inseparable * Teamwork represent a set of values that encourage listening and responding constructively to views expressed by others * Group work is NOT same as team * Working-group focuses on individual goals * strong, clearly focused leader * group’s purpose = organizational mission * individual work product * efficient meetings * measured