behavioral finance
All editorial pieces filed under behavioral finance. 0 quick takes · 0 notes · 10 deep dives.
Market Timing
The attempt to predict market highs and lows to shift allocation between equity and cash or bonds; empirical success rates are approximately 5% per SEBI 2024 re
Dollar Cost Averaging (DCA) / SIP
Investing a fixed sum at regular intervals regardless of price, automatically buying more units when markets fall and fewer when they rise — India's SIP model i
Rebalancing
The periodic or threshold-triggered process of restoring a portfolio to its target asset allocation, mechanically selling outperformers and buying underperforme
Narrative Fallacy
The human tendency to construct coherent causal stories from random or complex events, causing investors to mistake compelling narratives for data-backed invest
Regret Aversion
The tendency to avoid making decisions that could lead to regret, causing investors to defer action, hold crowded positions, and systematically under-rebalance
Herd Behavior
The tendency of investors to mimic crowd actions, producing momentum-driven bubbles and panics that disconnect prices from fundamental value.
Recency Bias
The cognitive tendency to over-weight recent events when forecasting, causing investors to chase last year's winners and flee last year's losers.
Loss Aversion
Kahneman & Tversky's Prospect Theory finding that losses hurt approximately 2–2.5× more than equivalent gains feel good, producing asymmetric and often suboptim
Anchoring Bias
The tendency to fixate on an initial reference price — the "anchor" — and insufficiently adjust when new information arrives, documented by Tversky & Kahneman (
Time-Weighted Return (TWR)
The compound growth rate of a portfolio that eliminates the effect of external cash flows, isolating manager skill from investor timing — the CFA Institute GIPS