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Behavioral Finance Guide

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Behavioral finance is an approach to modeling markets that considers human cognitive factors. Standard economic models view markets as perfect information processing machines that always efficiently price assets and securities. This differs from the common observation that prices often seem irrationally high or low due to excessive enthusiasm or fear. Behavioral finance focuses on inefficiencies such as errors of logic, herd behavior and emotional decisions that cause inaccurate prices. The following are core concepts of behavioral finance.
Animal Spirits
Bounded Rationality
Bull Trap
Capitulation
Cognitive Biases
Concept Company
Dumb Money
Falling Knife
Fear Of Missing Out
Freeriding
Greater Fool Theory
Greed Is Good
Herd Behavior
Home Bias
Irrational Exuberance
Logical Error
Long Squeeze
Mr Market
Noise Traders
Sell On News
Smart Money
Speculation
Speculative Bubbles
Wealth Effect
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Alpha vs Beta

The difference between two common investment measurements.

Regression Toward The Mean

An overview of Regression Toward The Mean.

Efficient Market Hypothesis

An overview of the Efficient Market Hypothesis.

Animal Spirits

An overview of animal spirits, a theory of investing.

Financial Markets

A definition of financial market with examples.

Organic Growth

A definition of organic growth with examples.

Information Costs

A definition of information costs with examples.

Channel Check

The definition of channel check with examples.

Business Risks

A list of common business risks.

Risk Treatment

The five things that can be done about risk.

Risk Management Effectiveness

A metric for measuring risk management.

Positive Risk

The potential that you'll achieve too much of a good thing.

Dread Risk

Any risk that people have a strong aversion too.

Risk Taking

The definition of risk taking with examples.

Risk Examples

A list of risk examples by type.

Risk Probability vs Risk Impact

The two main factors in modeling a risk.

Calculated Risk

A definition of calculated risk with an example.

Relative Risk

How to calculate relative risk with examples.

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