Overconfidence Bias

Overconfidence bias changes the investor behavior while making investment decision.
Investor overestimates their skills, knowledge and undervalues the risk and overestimates
their ability to control events

Anchoring and Adjustment Bias

An anchoring and adjustment bias refers to a cognitive bias that influences how investors

assess probabilities in an intuitive manner. Moreover, an anchoring and adjustment bias can

cause a financial market participant, to an investor, to make an incorrect financial decision,

such as buying an undervalued investment or selling an overvalued investment.

Cognitive Dissonance

When it comes to investing, cognitive dissonance can cause investors to fail to recognize

information that could help them make a good investment decision because they don't want
to admit that they made a poor decision in the first place. It can also make investors feel
uneasy and uncomfortable, particularly if the disparity between their beliefs and behaviors
involves something that is central to their sense of self.

Availability Bias
Having an availability bias, is that investors may not choose the best investments for their
portfolios and may end up with suboptimal results for their goals. A simple example
of availability bias in investing is an investor choosing mutual funds based on those that do
the most advertising.

Self-Attribution Bias
Self-attribution is a cognitive phenomenon by which investors attribute failures of their
investment decisions to situational factors, or market factors or economic factors and
successes to dispositional factors such as their own skill or intelligence. It also can cause
investors to hold under diversified portfolios, especially for investors who attribute their
success or attribute the fact that the portfolio is making money to their own skill.

Illusion of control bias

Illusion of control bias can lead the investors to trade more than prudent. Refers to describe
tendency for people to think that they have more control than apparent over events. It helps
the investor to trade too often by believing that their skill or past success gives them greater
control over the outcome of their decisions may cause them to adopt bad trading habits. They
might already run a portfolio that is profitable for investments so this could encourage them
to trade more often than necessary. The results are increased trading costs and exposure to
unhealthy risk.

Conservatism
Conservatism bias can ruin good decisions from being made, and investors should remain
mindful of that. It can cause investors to cling to a view or a forecast, behaving too inflexibly
when presented with new information and do react to new information but I often do so
pretty slowly. So, when presented with new financial information, the investors should ask
themselves how does this information actually influence their forecast or jeopardize my
forecast This frequent lack of adaptation by investors or experts of their judgment to the new
probabilities.

Ambiguity Aversion Bias

The ambiguity aversion bias can prevent the investors from giving two viable options equal
consideration. As a result, their decision making is affected. They may automatically decide
against something based solely on the fact that we feel that putting our trust in the unknown
is too risky.

Endowment
Investors who exhibit endowment bias value an asset more, when they hold it than they
don’t. It can affect attitude towards assets owned over long periods of time. An investor can
hold on to securities that they already own in order to avoid transaction cost associated with
unloading these securities. And it can also cause investors to hold securities that have either
inherited or purchased because they do not want to incur the transaction cost associated with
telling the securities.

Self-Control Bias
Having self-control bias tend to prefer investments that have shorter lock-in periods. Often,
this means that the investors ignore some better investment proposals only because it means
that their money will be locked in for a longer period of time. With self-control bias feel that
they should be able to spend the money in the near future. They do not have a long-term
outlook.