Survey Evidence on Core Factors of Behavioral Biases: The Role of Cognition and Affect
33 Pages Posted: 3 Sep 2020
Date Written: July 24, 2020
In the past decades, a multitude of judgmental and behavioral biases with regards to financial decision making has been found. But are these biases connected with each other? Are people prone to, e.g., illusion of control, usually also more prone to confirmation or hindsight bias? In this study we show that nine common biases can indeed be reduced to only three main factors. These three factors can be related to biases in self-related and non-self-related information processing and in the connection between those. We also show that cognitive reflection decreases biases related to external, while emotions can increase biases related to internal information processing.
Keywords: investment behavior, behavioral decision making, psychological biases, emotional state measures, cognitive strategies
JEL Classification: D91, D81, D83
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