![]() SCHWESER QUICKSHEET LEVEL 1 PDF PLUSSelf-attribution bias – Self-enhancing bias plus self-protecting bias causes overconfidence. Certainty overconfidence – Overstated probabilities of success. Prediction overconfidence – Leads to setting confidence intervals too narrow. Overconfidence bias – Illusion of having superior information or ability to interpret. Myopic loss aversion – If individuals systematically avoid equity to avoid potential short run declines in value (loss aversion), equity prices will be biased downward (and future returns upward). Loss aversion bias – Placing more “value” on losses than on a gain of the same magnitude.Availability bias – Future probabilities are impacted by memorable past events.Framing bias – Viewing information differently depending on how it is received.Mental accounting bias – Each goal, and corresponding wealth, is considered separately.Anchoring and adjustment – Fixating on a target number once investor has it in mind.Hindsight bias – Perceiving actual outcomes as reasonable and expected.Control bias – Individuals feel they have more control over outcomes than they actually have. Sample size neglect – Inferring too much from a small new sample of information. Base rate neglect – Too little weight on the base rate (e.g., probability of A given B). Representativeness bias – If-then stereotype heuristic used to classify new information.Confirmation bias – Seeking data to support beliefs discounting contradictory facts.Conservatism bias – Emphasizing information used in original forecast over new data. ![]() Emotional biases – Spontaneous reactions that affect how individuals see information.Cognitive errors – Result from incomplete information or inability to analyze.Apply heuristics until they no longer work, then adjust them.Investors structure their portfolios in layers according to their goals.Sentiment premium – Added to discount rate causes price deviation from fundamental values.Mental accounting – Assigning different portions of wealth to meet different goals.Self-control bias – Favor current consumption rather than saving income for future goals.Framing – The way income is framed affects whether it is saved or consumed.No one can consistently earn excess returns. Strong-form efficient – All information reflected in prices.Semi-strong form efficient – Prices reflect all public information.Weak-form efficient – Prices incorporate all past price and volume data. ![]() SCHWESER QUICKSHEET LEVEL 1 PDF FREE
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