Behavioural finance is a relatively new science which seeks to explain how human emotions can lead to unpredictable, irrational and harmful investment decisions.
Investors overestimate their ability and the accuracy of the information they have.
Investors assess situations based on superficial characteristics rather than underlying probabilities.
Investors overstate the probabilities of recently observed or experienced events because the memory is fresh.
How information is presented can affect the decision made.
Individuals make decisions in a way that allows them to avoid feeling emotional pain in the event of an adverse outcome.
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About the author
Paul Bolt, our wine expert, was recently inducted as a Chevalier de Champagne and actively trades on Livex.