Psychological biases can influence market trends from "summary" of Advances in Behavioral Finance by Richard H. Thaler
Psychological biases can significantly impact market trends. These biases are ingrained in human nature and can lead to irrational decision-making when it comes to financial matters. For instance, individuals may fall prey to the herd mentality, where they follow the actions of the majority without critically evaluating the situation. This can result in market bubbles or crashes that are not based on rational economic factors but rather on emotional responses. Another common bias that can influence market trends is overconfidence. People tend to believe that they are better at predicting market movements than they actually are, leading them to take on excessive risks. This overconfidence can result in poor investment decisions that can have far-reaching consequences for the market as a whole. Additionally, individuals may suffer from ...Similar Posts
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