Behavioral finance

Reddit Forum Price Impact on Stocks How concentrated discussion on investment forums like Reddit moves stock prices, a mechanism distinct from traditional information-based trading.

Reference Point Dependence How the chosen benchmark—purchase price, peak value, or market index—reshapes whether an investor experiences a gain or loss.

Reflection effect The reflection effect is the tendency to become risk-seeking when facing potential losses, while remaining risk-averse when facing potential gains — a reversal of risk preference depending on the domain.

Regret aversion Regret aversion is the tendency to make decisions based on avoiding the pain of future regret, often leading to suboptimal outcomes like holding losers or selling winners prematurely.

Regret Aversion Bias in Portfolio Management How fear of future regret causes investors to hold losing positions too long, avoid contrarian trades, and herd toward consensus.

Regret Aversion in Financial Decisions How the fear of regret causes investors to avoid action or cling to consensus choices, sacrificing returns for the comfort of shared blame.

Regret Bias Tendency to avoid decisions that might result in regret, leading to excessive caution and missed opportunities.

Representativeness heuristic The representativeness heuristic is the tendency to judge the probability that something belongs to a category based on how similar it is to the typical member of that category, while neglecting actual statistical base rates.

Representativeness Heuristic in Stock Picking How the representativeness heuristic in stock picking leads investors to overpay for companies that fit an ideal profile.

Retail Call-Buying Frenzy as a Sentiment Indicator Surges in small retail call purchases signal speculative fever and historically precede short-term market pullbacks. A contrarian signal for tactical traders.

Retail Investor Chat-Room Effect How online forums and message boards coordinate otherwise unrelated retail investors into buying surges that move stock prices and create flash volatility.

Retail Investor Sentiment The positioning and market preferences of small individual investors, tracked as a contrarian signal of market extremes and reversal risk.

Revenue Growth Anomaly in Equity Returns Stocks with high prior revenue growth tend to underperform in the future, a finding separate from profitability and earnings surprises.

Revenue Surprise vs Earnings Surprise: Which Drives the Longer Drift Revenue surprise vs earnings surprise drift shows different return patterns after earnings announcements; revenue beats often sustain longer post-announcement drift.

Risk-On Risk-Off Synchronized global shifts in investor appetite for risky versus safe assets, often triggered by macroeconomic surprise or geopolitical shock.

Round-Number Savings Targets: Why $10,000 Feels Different Than $9,800 How round-number milestones create psychological stopping points that cause savers to halt prematurely.

Safe-Haven Currency Flows as a Sentiment Indicator How inflows into the yen, Swiss franc, or dollar signal stress in risk markets and how traders use these flows to time equity exposure.

Salience Bias The tendency to overweight vivid, recent, or emotionally striking information in decisions, neglecting less dramatic but more statistically reliable data.

Savings Compartmentalization How dividing savings into separate labeled accounts for different goals changes how much people save.

Scope Insensitivity The cognitive bias where valuations and willingness-to-pay remain surprisingly stable across vastly different scales of a problem, leading to mispriced investments and portfolio misjudgements.

Scope Insensitivity and Financial Risk Perception Scope insensitivity causes investors to underweight large abstract risks. Learn why probability and magnitude often fail to move portfolio behavior.

Seasonality in Momentum Returns How momentum anomaly profits concentrate in specific months and nearly reverse in January, reflecting the interaction of trend-following with turn-of-year trading behavior.

Sector Rotation as a Sentiment Signal How capital flows between defensive and cyclical sectors reveal investor risk appetite and market sentiment in real time.

Segregation in Mental Accounting A cognitive bias where investors mentally separate investment outcomes into distinct 'accounts,' choosing to isolate losses from gains to enjoy them psychologically.

Self-Attribution Bias The tendency to credit investment wins to personal skill while blaming losses on external bad luck.

Sell in May Anomaly: What the Evidence Shows Reviews the statistical basis for the Halloween indicator, how persistent the seasonal pattern has been across markets, and why it persists despite being widely known.

Sell-Side Consensus Effect How analyst agreement on stock ratings creates crowded trades and distorts price discovery through herd behavior.

Sentiment Divergence as a Price Signal Sentiment divergence occurs when investor mood and price trends move apart—a warning signal that reversals may be near.

Sentiment Extremes and Mean Reversion How extreme investor sentiment readings predict reversals, and why traders use sentiment at statistical tails as contrarian signals.

Sentiment Reversal Rapid, dramatic shifts in investor mood from fear to greed or vice versa, often preceding significant market price reversals.

Sentiment-Momentum Interaction How positive investor sentiment amplifies price momentum, and how eventual sentiment mean-reversion triggers sharp reversals.

September Effect in Stock Returns Why September is historically the weakest month for stock returns, driven by tax-loss harvesting and portfolio rebalancing.

Share Repurchase Announcement Drift Share buyback announcements often trigger a persistent positive drift in returns as the market slowly recognizes the undervaluation signal. Explains the anomaly and evidence.

Short Interest Crowding Effect How a short interest crowding effect emerges when multiple hedge funds pile into the same bearish bet, creating hidden systemic risk and exposure to sudden short squeezes.

Short Interest Ratio Days-to-cover metric measuring how concentrated bearish bets are and their potential to trigger violent short-squeeze rallies.

Short Selling as a Sentiment Signal How aggregate short-sale activity reveals market pessimism and when elevated short interest predicts reversals versus ongoing declines.

Short-Interest Anomaly The empirical tendency for stocks with high short interest to subsequently underperform, despite the signal that sophisticated traders find them overvalued.

Side-Hustle Income Mental Accounting: Treating Extra Earnings as Play Money Mental accounting of side-hustle income means treating freelance and gig earnings as discretionary play money rather than debt payoff or savings—a bias rooted in how we categorize money by source.

Silver Lining Effect The preference for separately reporting a small gain alongside a large loss rather than presenting the net outcome together.

Size Effect The historical tendency for small-cap stocks to deliver higher risk-adjusted returns than large-cap stocks over long horizons.

Small-Cap vs Large-Cap Relative Performance as a Sentiment Gauge How the ratio of small-cap to large-cap returns reveals investor risk appetite and can signal market euphoria or risk-off sentiment.

Smart Money vs. Dumb Money Index Indicator tracking divergence between institutional and retail flows to identify contrarian reversals and extremes.

Snake-Bite Effect How a single investment loss in an asset class triggers lasting, excessive risk avoidance of that entire category.

Social Media Pump Dynamic How viral stock tips on social platforms create coordinated demand waves without underlying information.

Social Media Sentiment Trading Using aggregated chatter from Twitter, Reddit, and other platforms as high-frequency proxies for crowd emotion and market moves.

Social Proof Bias in Investment Decisions How observing others' investment choices drives momentum, herd behavior, and bubbles—a cognitive shortcut that outweighs fundamental analysis.

Social Proof in Investing How observing that others are buying a security substitutes for independent analysis, amplifying market bubbles, crashes, and herding behavior.

Social Proof in IPO Demand How investor enthusiasm signals during underwriting trigger herding demand that self-reinforces IPO subscription and allocation pressure.

Social Sentiment Index in Investing What social sentiment indices measure, how they aggregate crowd opinion signals, and their limitations as contrarian or momentum indicators.

Social Trading Networks Platforms that allow retail investors to discover, copy, and automatically replicate the portfolios of other investors, institutionalizing peer-driven portfolio mimicry.

Sovereign Wealth Fund Herding in Global Markets How sovereign wealth funds from multiple countries converge on trophy assets, distorting prices in real estate and equities through coordinated herding behavior.

Status quo bias Status quo bias is the tendency to prefer things to remain as they are, treating the current state as a reference point and judging changes as losses rather than as potential gains.

Status Quo Bias and Investor Inertia How default preferences and inertia cause investors to hold suboptimal asset allocations far longer than rational models predict.

Status Quo Bias vs Loss Aversion: Key Differences Status quo bias and loss aversion are related but distinct cognitive patterns that shape investor decisions. Understand how inertia and loss-pain diverge.

Stock Split Announcement Premium Why stocks typically jump in price when a split is announced—a behavioral anomaly that reveals investor psychology and market inefficiency.

Style-Box Herding: Growth vs Value Rotation How mutual fund mandates and consultant pressure push managers to crowd into whichever style box is winning, amplifying factor momentum.

Sunk Cost Bias The tendency to continue bad investments because of prior losses already incurred.

Sunk Cost Bias in Trading The tendency to hold losing positions due to past losses rather than forward-looking fundamentals.

Sunk Cost Fallacy in Portfolio Decisions Sunk cost fallacy in portfolio decisions leads investors to hold losing positions because of money already spent, ignoring current fundamentals.

Sunk-cost fallacy The sunk-cost fallacy is the tendency to continue investing in a losing proposition because of money already invested, rather than basing the decision on current conditions and future prospects.