If you think investors are rational and markets are efficient, then you are dead wrong. In case you thought the irrational in Greenspan’s “irrational exuberance” was an exaggeration take a peak at these
Affect Heuristic: we use feelings not logic to make snap decisions, even when we don't need to: see Risk, Stone Age Economics and the Affect Heuristic.
Ambiguity Aversion: we don't mind risk but we hate uncertainty: see Ambuiguity Aversion: Investing Under Conditions of Uncertainty.
Anchoring: our habit of focusing on one salient point and ignoring all others, such as the price at which we buy a stock: see Anchoring: the Mother of Behavioral Biases.
Authority, Appeal to: we tend to thoughtlessly obey those we regard as being in positions of authority: see CEO Pay: Because They're Worth It?.
Barnum Effect: we see insightful information in random rubbish: see Your Financial Horoscope.
Beauty Effect: we attribute qualities to people based on their appearance: see Trust is in the Eye of the Beholder.
Benford's Law: in finance numbers starting with 1 are more frequent than those starting 2 and so on: see Forensic Finance, Benford's Way.
Bystander Effect: people waiting for others to take the lead when someone else in is trouble: see A Lollapallooza Effect: Capitalism & The Death of Wang Yue.
Choice Overload: too much choice makes us indecisive: see Jam Today, Tyranny Tomorrow?
Find out the rest at http://www.psyfitec.com/p/list-of-behavioral-biases.html
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