Behavioral finance

52-Week High Anchor and Price Momentum 52-week high anchor and momentum: how investor anchoring to recent highs creates predictable short-term underperformance and outperformance patterns.

AAII Sentiment Survey as a Contrarian Indicator How extreme AAII sentiment survey readings act as contrarian signals for near-term stock market direction.

Accruals Anomaly and Earnings Quality Accruals anomaly earnings quality: firms with high accruals relative to cash flow underperform. Learn to assess earnings reliability.

Action bias Action bias is the tendency to take action when inaction might be better, driven by the discomfort of uncertainty and the need to feel in control.

Advance-Decline Line and Market Breadth Sentiment The advance-decline line tracks the running total of advancing minus declining stocks, revealing whether rallies or selloffs are broadly supported or driven by a narrow core.

Affect Heuristic How current emotional state substitutes for deliberate analysis, causing people to judge liked investments as lower-risk and higher-return than data supports.

Affect Heuristic in Stock Selection How emotional feelings toward a company or brand unconsciously override fundamental analysis in buy and sell decisions.

Ambiguity aversion Ambiguity aversion is the tendency to prefer choices with known probabilities over choices with unknown or ambiguous probabilities, even when the unknown option has a higher expected value.

Ambiguity Aversion in Investing Why investors prefer known risks over unknown ones, and how this bias limits diversification into unfamiliar asset classes and markets.

Analyst Forecast Herding The tendency of sell-side analysts to cluster earnings estimates around consensus, suppressing genuine disagreement and reducing information value.

Analyst Forecast Revision Drift Stock prices drift after analyst forecast revisions, continuing upward or downward for weeks — an anomaly distinct from post-earnings drift but driven by revisions.

Analyst Upgrade and Downgrade Clustering How analyst rating changes cluster in time across firms covering the same stock, revealing herd behavior among sell-side research teams that distorts price discovery and creates predictable reversals.

Analyst Upgrades and Downgrades as Sentiment Proxies How analyst upgrades and downgrades reflect crowd sentiment, reveal market timing risks, and track sector rotation.

Anchoring bias Anchoring bias is the tendency to rely too heavily on an initial number when making subsequent estimates or decisions, causing that first figure to disproportionately influence the final judgment.

Anchoring Bias in Stock Price Evaluation How anchoring bias in stock price evaluation causes investors to rely on arbitrary reference prices when judging value, distorting buy and sell decisions.

Anchoring Bias in Trading Cognitive bias where traders over-weight initial price information when making investment decisions, leading to systematic errors in valuation.

Anchoring in Trading A cognitive bias in which traders overweight an initial price level when making subsequent trading decisions.

Asset Growth Anomaly The asset growth anomaly reveals that firms with rapid asset expansion deliver poor stock returns, challenging classical finance assumptions about growth.

Asset Tangibility and Stock Return Anomaly Why firms with intangible-heavy assets earn higher returns: the asset tangibility stock return anomaly explained.

Asymmetric Risk Appetite The pattern in which investors become risk-seeking in losses and risk-averse in gains, per prospect theory.

Asymmetric Updating on Good vs Bad Financial News Why investors revise beliefs more readily after favorable news than unfavorable news, creating systematic overoptimism and asymmetric updating.

Attention Bias in Trading Attention bias in trading is the tendency of retail investors to buy stocks that grab media or news attention rather than those with the best fundamentals.

Attention-Driven Trading The tendency of retail investors to disproportionately purchase stocks that attract media coverage or social attention, driving temporary price appreciation followed by reversal.

Attentional Bias The tendency for investors to overweight assets and events that have recently captured their attention, regardless of fundamental value.

Attribute Substitution in Financial Decisions Attribute substitution bias in finance: how investors unconsciously swap hard questions with easier ones, often leading to costly investment mistakes.

Authority Bias The cognitive tendency to overvalue the opinions of perceived experts and defer critical analysis of their claims.

Availability Bias in Investing Cognitive tendency to overweight investments that are recent, memorable, or widely discussed when making portfolio decisions.

Availability heuristic The availability heuristic is the tendency to judge the probability or frequency of something based on how easily examples come to mind, rather than on actual statistical likelihood.

Availability Heuristic in Investing How availability heuristic makes investors overweight recent or vivid events when estimating risk and probability, distorting portfolio choices.

Baker-Wurgler Sentiment Index A composite measure of investor sentiment derived from IPO volume, equity turnover, dividend initiations, and closed-end fund discounts, used to predict market returns and volatility cycles.

Base Rate Neglect in Investing Why investors ignore statistical base rates when evaluating stocks and how this distorts probability judgments about future returns.

Base-rate neglect Base-rate neglect is the tendency to ignore the actual statistical frequency or baseline probability of a category when making judgments, and instead rely on specific information about an individual case.

Belief Perseverance Bias in Finance Belief perseverance bias in finance: why investors cling to original views despite contradicting evidence, and how it affects portfolio decisions.

Belief Perseverance: Why Investors Resist Updating Their Views The cognitive bias that makes investors dismiss contradicting evidence and cling to original theses even when conditions change.

Bellwether Stock Leading stock whose price movements predict or trigger sector-wide herd behavior and broader market trends.

Benchmark Hugging Active fund managers clustering portfolio holdings near index weights to minimise tracking error and career risk, sacrificing outperformance potential.

Bizarreness Effect and Financial Memory How the bizarreness effect distorts financial memory: investors overweight rare market events and misunderstand tail-risk frequency.

Bond Market Sentiment Indicators Bond market investor sentiment indicators measure fixed-income crowd mood through credit spreads, high-yield flows, and duration positioning. They reveal risk appetite differently than equity volatility gauges.

Break-Even Effect The irrational willingness to accept greater risk specifically to recover losses back to zero on a prior trade.

Broad framing Broad framing is the tendency — or discipline — to evaluate decisions, risks, and outcomes in their full context, considering the impact on the overall portfolio and long-term goals rather than in isolation.

Bubbles and Manias Periods of excess speculation that inflate asset prices far above intrinsic value, driven by herd behavior, until crash occurs.

Bucket Strategy and Mental Accounting in Retirement How bucket strategy uses mental accounting in retirement: organizing assets into time-segmented buckets reduces spending anxiety but can worsen asset allocation.

Budget Category Overspend and the Spillover Effect Understand how mental budget overruns in one category trigger rationalized excess in adjacent categories, unraveling budgeting discipline and eroding financial control.

Bull-Bear Spread The arithmetic gap between bullish and bearish survey respondents, used to gauge market sentiment and predict short-term reversals.

Capitulation Selling Panic liquidation of assets by retail investors and weak hands, often marking the exhaustion of selling pressure and the beginning of market reversals.

Cascade Selling in Bear Markets How cascade selling and herding behavior in bear markets amplify declines beyond fundamental drivers when institutional redemptions trigger imitative selling.

Cash-on-the-Sidelines Indicator Money-market fund balances as a sentiment gauge for dormant buying power and near-term market re-entry signals.

Cashback Rewards and Mental Accounting: Why Rebates Get Spent, Not Saved Mental accounting causes consumers to spend credit-card cashback immediately rather than treat it as a cost reduction, driven by loss aversion and fund segregation.

Celebrity Investor Coattail Effect Celebrity investor coattail effect: how retail investors amplify stock moves by mimicking disclosed positions of famous fund managers.

CEO Overconfidence and the Investment Anomaly CEOs with excessive confidence tend to overinvest in capital projects, and their firms subsequently underperform the market, creating a predictable return anomaly.

Certainty effect The certainty effect is the tendency to overweight outcomes that are certain relative to outcomes that are merely probable, causing people to prefer sure things even when the expected value of a gamble is higher.

Choice Bracketing in Portfolio Decisions Explore how investors evaluate trades in isolation versus as part of a portfolio and why narrow bracketing leads to suboptimal risk-taking.

Choice Overload The decision paralysis and reduced participation that occurs when the number of available options exceeds a person's capacity to evaluate them.

Choice Overload Bias The paralysis and poor outcomes that follow when investors face an overwhelming number of options.

Closed-End Fund Discount The persistent gap between a closed-end fund's market price and its net asset value, interpreted as a barometer of retail investor sentiment and cycle timing.

Closing a Budget Category: What Happens When a Mental Account Runs Dry How people behave when a mental spending category is exhausted: overspend from other accounts, borrow forward, or practice abstinence.

Clustering Illusion Mistaking random patterns for meaningful trends in stock price movements and market data.

Clustering Illusion and Chart Pattern Trading Why clustering illusion causes traders to see meaningful signals in random price series, fueling overconfidence in technical analysis.

Clustering Illusion in Investing How investors falsely perceive patterns in random price sequences and act on those phantom patterns, leading to overtrading and poor returns.

Commitment and Consistency Bias The drive to maintain consistency with prior public commitments, even when evidence suggests the original decision was wrong.