Behavioral Economics - #2

What is behavioral economics?

• The study of how emotions and psychology influence financial decisions

• The mathematical analysis of market trends

• The study of corporate financial statements

• The process of balancing checkbooks

When someone holds onto a losing investment because they've already invested time and money, this illustrates:

• Confirmation bias

• Sunk cost fallacy

• FOMO

• Hedonic adaptation

The tendency to search for information that confirms our existing beliefs is called:

• Overconfidence bias

• Herd mentality

• Confirmation bias

• Loss aversion

Which term describes the fear of missing out on potential opportunities or experiences?

• Endowment effect

• Overestimation

• Hedonic adaptation

• FOMO

The tendency to value things more highly simply because we own them is known as:

• Loss aversion

• Endowment effect

• Herd mentality

• Overconfidence bias

What describes our tendency to return to a baseline level of happiness after major positive or negative changes?

• Hedonic adaptation

• FOMO

• Overestimation

• Confirmation bias

The practice of following financial trends simply because others are doing it represents:

• Overconfidence bias

• Loss aversion

• Herd mentality

• Endowment effect

Which bias leads people to feel more pain from losses than pleasure from equivalent gains?

• Confirmation bias

• Overestimation

• Endowment effect

• Loss aversion

When investors believe they are better at picking stocks than they actually are, they demonstrate:

• Overconfidence bias

• Confirmation bias

• Hedonic adaptation

• FOMO

The tendency to overestimate our abilities or the accuracy of our predictions is called:

• Sunk cost fallacy

• Overestimation

• Loss aversion

• Herd mentality