Psychological biases can cloud judgment and lead to poor decisions from "summary" of Contrarian Investment Strategies in the Next Generation by David Dreman
Psychological biases can cloud judgment and lead to poor decisions. These biases are deeply ingrained in human nature and can have a significant impact on how we make decisions, especially in the realm of investing. One common bias is overconfidence, where individuals tend to overestimate their abilities and knowledge. This can lead to taking on excessive risks and making ill-informed decisions.
Another bias is anchoring, where individuals rely too heavily on the first piece of information they receive when making decisions. This can lead to ignoring new information that may contradict or challenge their initial beliefs. Additionally, confirmation bias plays a role in decision-making, as individuals tend to seek out information that confirms their existing beliefs while ignoring information that may challenge them.
Emotional biases also come into play when making decisions. Fear and greed can cloud j...
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