MBA BM 2024-26 || XIMB || Founder-The Cognitive Couch || Career Launcher || Albratoss Remedies || Writtenlyhub || VIT'21
🧠 Food for thought - Behavioral Finance: Wishful Thinking & Cognitive Dissonance 📊 Balancing the 9 to 5 grind can be tiring, but I've been channeling my curiosity into courses from marketing and finance backgrounds to explore more! 📚 In my recent studies of 'Financial Markets' from Coursera, I stumbled upon two fascinating concepts that play a big role in financial decision-making: 1️⃣ Wishful Thinking Bias: Picture this – you've invested in a startup, and despite market indicators showing struggles, you're convinced it's destined for success. That's wishful thinking bias, where our desires cloud rational judgment. Example 1: Holding onto a plummeting crypto because you hope for a sudden surge. Example 2: Ignoring warning signs in a company's financial reports because you're emotionally attached to the stock. 2️⃣ Cognitive Dissonance: This one's a bit sneaky. It's the discomfort we feel when our beliefs clash with our actions. In finance, it often appears when we justify holding an underperforming investment. Example 1: You criticize a company's management publicly but keep holding their shares. Example 2: You invest in a "green" energy company while driving a gas-guzzling car. These biases remind us that even in the world of finance, our minds can play tricks on us. Awareness of these quirks can lead to more informed choices. PS - This course is thorough and is proving to be genuinely engaging for me. Guided by Robert Shiller, Professor of Economics at Yale University. He received the 2013 Nobel Prize in Economic Sciences, sharing it with Eugene Fama and Lars Peter Hansen. The three received the prize “for their empirical analysis of stock prices.” Have you encountered these biases in your financial journey? #BehavioralFinance #Investing #Coursera #FinancialMarkets #WishfulThinking #CognitiveDissonance
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Driving impactful curiosity in between the noises that makes you think | Data Analytics Enthusiast | NIT Rourkela
11moWow! Yaar Khushboo Glad to see your interest in behavioral finance 😄 As this is something I am keen to learn. One such Bias could be the recency bias - Ex - If a stock is performing well so far, doesn't mean that it will keep growing & the vice versa We could have an interesting conversation around this someday 😄