Most of us have fallen victim to this cognitive bias at one time or another, whether with coin flips, dice rolls, or other activities in which chance plays a role. Anytime we see a significant deviation from the distribution of outcomes that we expect
Behavioral finance combines psychology and economics to explain how investors act. Instead of assuming that people (e.g., investors) always make rational financial decisions, behavioral finance proponents argue that behavioral biases strongly influence financial decisions. Unfortunately, behavioral biases can have a …