The Big List of Behavioral Biases

See One Long Argument: A Big List of Behavioral Biases, as an introduction to this ever-growing list of irrational or, at least, slightly odd behaviours in the sphere of investment:

• Action Bias: we have an urge to action in situations where doing nothing would be more rational: see Bias in Action.
• Adverse Selection: you should only offer health insurance to those who don't need it: see Dark Pools and Adverse Selection.
• 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.
• Age Related Positivity Effect: older investors prefer to ignore negative information in order to avoid negative emotions: Age Makes You Happier - And Poorer.
• Akerlof's Lemons: why the market for used cars doesn't work properly: see Akerlof's Lemons: Risk Asymmetric Dangers for Investors.
• 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.
• Arbitrary Coherence: we value things arbitrarily but then use this as an anchor for future, coherent, valuations: see I Don't Know What I Like (And I Don't Know How What It's Worth, Either).
• Attention, Limits of: our inability to attend to multiple things, and the way this is exploited: see Zombies in the City of London.
• Attraction Effect: adding a defective option to a choice set can increase the probability of someone choosing one of the other options over another: see The Cherry Coke Effect?
• Attribution Bias: we make attributions about the reasons for ours and others' behavior - but we're biased to see the world from our own perspective: see Brains, Bulls and Lucky Tossers
• 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?.
• Babe Ruth Effect: winning big but rarely beats winning often and small: see It's How Big, Not How Often, That Counts.
• Backfire Effect: if you present some people with evidence contradicting their beliefs it will make them believe them all the more: see Backfiring Investment Theories.
• Barnum Effect: we see insightful information in random rubbish: see Your Financial Horoscope.
• Base Rate Fallacy: we fail to adjust predictions for prior probabilities: see Bayesian Unreason in the Modern World.
• 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.
• Bias Blind Spot: we agree that everyone else is biased, but not ourselves: see Bamboozled By Your Blind Spot Bias.
• Bird in the Hand Fallacy: the idea that dividends now are more certain than capital gains later, therefore dividends are more important than capital gains: see Angels, Pins, Capital Gains and Dividends.
• 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 Deferral: see Procrastination.
• Choice Overload: too much choice makes us indecisive: see Jam Today, Tyranny Tomorrow?
• Clever Hans Effect: we give off unconscious cues that are unconsciously picked up on: see Market Confidence, Tricks and Placebos.
• Cocktail Party Effect: the auditory ability to filter out background noise to focus on one particular stimuli, like your own name in a noisy room: see To Boldly Go: Risk and the Prime Directive.
• Cognitive Depletion: see Ego Depletion.
• Cognitive Dissonance: the effect of simultaneously trying to believe two incompatible things at the same time; see Fairy Tales for Investors.
• Commitment Bias: once we'e publicly committed ourselves to a position we find it difficult to retreat: see Robert Cialdini and the Weapons of Influence.
• Confirmation Bias: we interpret evidence to support our prior beliefs and, if all else fails, we ignore evidence that contradicts it: see Confirmation Bias, the Investor's Curse.
• Conjunction Fallacy: the conjunction of two events is always less likely than a single event: see Behavioral Finance's Smoking Gun.
• Conversational Bias: we tend to present ourselves in the best possible light, which has knock-on consequences for the relaying of positive and negative information: see Herd of Investors.
• Curse of Knowledge: no matter how we try we can't forget our knowledge, meaning we may overvalue stuff: see BB101: #2 Curse of Knowledge.
• Cursedness: the state of someone overestimating their own knowledge and simultaneously underestimating the knowledge of others: see Cursed By Momentum.
• Data Mining Errors: if you mine the data hard enough you can prove anything: see Twits, Butter and the Superbowl Effect.
• Data Snooping Bias: see Data Mining Errors Exploiting the Anomalies.
• Denomination Bias: we're more likely to spend small denomination notes than large ones: see Fooled by Fluency.
• Defensive Decision Making: where people make the decision they think they can defend rather than the one they think is best: see The Turkey Illusion: An Audience With Gerd Gigerenzer.
• Disaster Myopia: an in-built tendency to forget really nasty stuff after it's stopped happening for a while: see Black Swans,Tsunamis and Cardiac Arrests.
• Disappointment Aversion: we run away from situations if they produce less good results than we wanted, even if they're objectively good: see Do Stocks Always Outperform (in the Long Run)?
• Disposition Effect: we prefer to sell shares whose value has increased and keep those whose value's dropped: see Disposed to Lose Money.
• Dread Risk: an irrational fear of extreme events: see Dread Risk: Investing Outside the Goldfish Bowl.
• Dunning-Kruger Effect: some people never learn by experience: see Don't Lose Money in the Stupid Corner.
• Easterlin Paradox: between countries, having more money doesn't make you happier: see Gross National Happiness.
• Economic Reflexivity: the way that the economy changes people's behavior, which changes the economy: see Soros' Economic Reflexivity.
• Effort Justification: we value things more highly if we have to put significant effort into creating or possessing them: see Building An IKEA Portfolio.
• Ego Depletion: self-control draws on a limited supply of psychic resources and when these are exhausted willpower is diminished: see The Cherry Coke Effect?
• Emperor's New Clothes Syndrome: if a belief structure has no evidence to support it, it can only survive because everyone is willing to believe in it: see The Emperor's New Markets.
• Endowment Effect: people value stuff more because they own it: see Building An IKEA Portfolio.
• Familiarity Effect: being familiar with something makes you favour it: see The Language of Lucre.
• Fallacy of Composition: the tendency for individuals to act in their own self interest and, in by doing so en-mass, to cause themselves to lose out: see Panic!
• Fallacy of Frequency: we see regular patterns where none exist: see Deep Time and the Fallacy of Frequency.
• False Memory: memory is a construction, not a direct recollection : see Financial Memory Syndrome.
• Focusing Illusion: a specific form of framing caused by getting people to focus on one particular aspect of a situation: see Money Can't Buy You Happiness.
• Framing: the way a question or situation is framed can determine your response: see Investors, You've Been Framed.
• Fundamental Attribution Error: we attribute success to our own skill and failure to everyone else's lack of it: see Profit from Self-Knowledge.
• Gambler's Fallacy: the mistaken belief that a run of specific results in a random process must revert: see Recency, Hot Hands and the Gambler's Fallacy.
• Galatea Effect: some people succeed simply because they think they should: see How To Be A Bad Manager: The Pygmalion Effect.
• Group Polarization: the tendency of groups to move to a more extreme position than the average: see Risky Shifts.
• Halo Effect: we take one positive feature of something and apply it to everything else associated with it: see The Halo Effect: What's In A Company Name?
• Handicap Principle: animals take on handicaps to demonstrate their fitness: see Advertising on the Handicap Principle.
• Hard-Easy Bias: in competition we're overconfident on easy problems and under-confident on hard ones, even though everyone else feels the same: see Parsimonious, Big Picture Behavioral Bias.
• Hawthorne Effect: studying people changes their behaviour: see Be a Sceptical Economist.
• Herding: we tend to flock together, especially under conditions of uncertainty: see Herd of Investors.
• Hindsight Bias: we're unable to stop ourselves thinking we predicted events, even though we're woefully bad at predicting the future: see Hindsight Bias.
• Home Bias: investors prefer to invest in their own, local markets, rather than seeking wider diversification: see Home is Where the Risk is.
• Hot Hand Effect: the erroneous belief that certain runs of success are attributable to skill rather than luck: see Recency, Hot Hands and the Gambler's Fallacy.
• Hyperbolic Discounting: the tendency to extrapolate the cost of future payments out to infinity: see Putting Down The Credit Cards.
• Ideomotor Effect: we sometimes physically react to ideas without being aware of our behavior: see To Boldly Go: Risk and the Prime Directive.
• IKEA Effect: people value stuff more if they made it, no matter how worthless and tatty their creation is: see Building An IKEA Portfolio.
• Illusion of Control: we do things that make us feel in control, even if we're not: see The Lottery of Stockpicking.
• Illusory Pattern Recognition: under conditions of uncertainty we make up patterns which can then control: see Google Charts You Can Trust.
• Information Overload: too much information reduces the accuracy of the results we produce from it: see The Curse of Seven.
• Instant History Bias: how to create a new fund with a track record: see Survivorship Bias in Magical Mutual Funds.
• Inter-group Bias: we evaluate people within our own group more favorably than those outside of it: see de Tocqueville: Trust in Self-Interest.
• Internet Filter Bubble: our profiles are used to customize our internet experiences: see Risky Shifts.
• Introspection Illusion: we value information gleaned from introspection more than we value our actions: see Bamboozled By Your Blind Spot Bias.
• January Effect: stocks go up in January, far more than they should: see Rock On January Effect.
• Jevons' Paradox: making an energy source more efficient means we use more of it: see Caught in a Rat Trap: Jevons' Paradox.
• Lake Wobegone Effect: see Overconfidence.
• Law of Large Numbers: the more money you have to invest the harder it is to outperform the market: see Hedge Funds Ate My Shorts.
• Law of Small Numbers: the more samples you have the more likely you are to approximate to the real average: see Sharpshooting the Investment Gurus.
• Less-is-More Effect: the less knowledge you have the more accurate your predictions: see Satisficing Stockpicking.
• Limit Order Effect: limit orders exaggerate apparent behavioral biases: see Limit Orders, on the Crumbling Edge of Behavioral Finance.
• Linda Problem: see Conjunction Fallacy.
• Longshot-Favorite Bias: favorites are underpriced and longshots are overpriced: see Holes in Black Scholes.
• Loss Aversion: we do stupid things to avoid realizing a loss: see Loss Aversion Affects Tiger Woods, Too.
• Low Volatility Anomaly: lower volatility stocks offer higher rewards: see Low Risk, High Reward: The Low Volatility Anomaly
• Man With A Hammer Syndrome: some people have a single tool and see every problem as a nail: see Newton's Financial Crisis: The Limits of Quantification.
• Mental Accounting: we divide our money into different pots and then treat them all separately: see Mental Accounting, Not All Money is Equal.
• Mere Exposure Effect: how merely exposing someone to something means they're more likely to prefer it: see Fooled by Fluency.
• Mere Possession Effect: see Endowment Effect: see Building An IKEA Portfolio.
• Mindlessness: the state of performing complex functions automatically, without thinking: see Mindless With Money.
• Minsky Moment: the moment people realise they can't repay the debts they owe: see Springing the Liquidity Trap.
• Money Illusion: we value money in absolute not nominal terms: see Money Illusion.
• Monty Hall Problem: three doors and one prize, but which one do you pick: see Monty Hall Economics.
• Moral Hazard: if someone underwrites our failures we're more likely to take risks: see Moral Hazard But Thanks For All The Fish.
• Moral Licensing: the act of doing something moral, like buying environmentally friendly products, licenses us to do something immoral, like thieving: see So What IS the Point of Financial Advisers?
• Motivation Crowding Out Effect: see Undermining Effect.
• Myopic Loss Aversion: the tendency to check your portfolio every five minutes, and sell as soon as you think you might lose money: see Portfolio Tracking Is For Losers.
• Negativity Bias: we're biased towards negative feelings associated with contamination: see N is for Negativity Bias.
• Noise Trading: people trade and synchronise on sentiment rather than fundamentals: see Idiot Noise Traders.
• Observer Bias: observers make errors, but in a particular way based on the normal distribution: see Laplace's Hammer: the End of Economics.
• Overconfidence: we're way too confident in our abilities, which seems to be an in-built bias that we're unable to overcome without excessive effort: see Overconfidence and Over-optimism.
• Overjustification Effect: see Undermining Effect.
• Persuasion Bias: the tendency to see new information as independent, failing to adjust for repetition: see Herd of Investors.
• Placebo Effect: you can be cured by what you believe in: see Market Confidence, Tricks and Placebos.
• Pluralistic Ignorance: no one believes (e.g. that markets are not overvalued) but everyone believes that everyone else believes: see The Emperor's New Markets.
• Pollyanna Principle: people remember nice stuff more than nasty: see Idiots in Investing Echo Chambers.
• Positivity bias: see: Pollyanna Principle.
• Priming: exposure to some event changes our response to a later event: see To Boldly Go: Risk and the Prime Directive.
• Procastrination: the tendency to prevaricate rather than make difficult decisions that only have a future pay-off: see Retirees, Procrastinate at Your Peril.
• Pro-Innovation Bias: the belief that an innovation is an unalloyed good and should be deployed, unaltered, into as many situations as possible: see Putting Pro-Innovation Bias on the Blockchain.
• Pseudocertainty Effect: wording a question differently can elict a different response: see The Death of Homo economicus.
• Psychological Resilience: some people handle traumatic events better than others: see Be Prepared, Be Resilient.
• Publication Bias: researchers tend to only publish positive results, but negative ones are just as important: see HARKing Back: Lessons in Investing from Science.
• Pygmalion Effect: some people fail because their managers think they should: see How To Be A Bad Manager: The Pygmalion Effect.
• Recency: the tendency to weight recent information more heavily: see Recency, Hot Hands and the Gambler's Fallacy.
• Reciprocity: our sense of fairness will override economic rationality: see When a Dollar's Not Just a Dollar.
• Reflection Effect: a preference for risk seeking in the presence of a loss is reversed in the presence of a profit, and vice versa: see Novelty, Unicorns and the Stressed Investor.
• Regret: we don't do things we may regret: see Regret.
• Representative Heuristic: we compare the item under consideration to whatever we happen to bring to mind: see Behavioral Finance's Smoking Gun.
• Resource Depletion: exerting self-control depletes our psychological resources, weakening our self-control: see Mindless With Money.
• Risk Aversion: people prefer certain outcomes to uncertain ones, even when the returns on the latter are expected to be better: see A Tall Tale of Risk Aversion.
• Risky Shift: see Group Polarization: see Risky Shifts.
• Room Effect: moving from one room to another causes you to forget things - memory is context dependent: see Lost in Your Own Memories: Age and the Room Effect.
• Round Number Effect: investors seem to be unhealthily attracted to round numbers: see Irrational Numbers; Price Clustering and Stop Losses.
• Sailing-Ship Effect: old technology can improve rapidly under the pressure of innovation: see Disruption by Digital Wallet: The Sailing-Ship Effect Rewritten.
• Salience: the tendency to focus on only the most easy to bring to mind features of some concept or person: see Salience is Golden.
• Satisficing: the idea that we make "good-enough" decisions, rather than rational ones: see Satisficing Stockpicking.
• Seersucker Illusion: for every seer there's a sucker: see James Randi and the Seersucker Illusion.
• Selection bias: choosing unrepresentative samples of humanity in an experiment leads to unrepresentative results: see Weird Markets.
• Selective Perception: different people perceive the same situation differently, but don’t realise it - a frequent problem in complex projects: see Corporate Bias: When Projects Go Bad.
• Self-control: without it we don't make very good investors: see Deep Time and the Fallacy of Frequency.
• Self-Enhancing Transmission Bias: people tell others about their successes more often than their failures, and their listeners don't take account of this: see Facebook Friends Can Make You Poor.
• Self-Serving Attribution Bias: see Self-Serving Bias
• Self-Serving Bias: success is down to personal skill, failure to external intervention: see Where Two Strangers Never Meet: Self-Serving Bias.
• Sharpshooter Effect: beware experts painting targets around bullet holes: see Sharpshooting the Investment Gurus.
• Simulation Heuristic: we figure out how likely an event is by how easily we can imagine it; we're often wrong: see Scamming Journalists with Counterfactuals.
• Social Intelligence Hypothesis: complex socialization was the driving force behind the evolution of large human brains, and so social behavior can explain many behavioral biases: see Facebook Friends Can Make You Poor.
• Sunk Cost Fallacy: future investment is justified because lots of prior investment has occurred: see Corporate Bias: When Projects Go Bad.
• Superbowl Effect: random events appear to predict real outcomes, but they don't: see Twits, Butter and the Superbowl Effect.
• Superstition: we can't help believing in beasties that go bump in the night, even in stockmarkets: see Science, Stocks and Superstition.
• Survivorship Bias: this is an error that comes from focusing only on the examples that survive some particular situation: see Survivorship Bias in Magical Mutual Funds.
• Texas Sharpshooter Effect: see Sharpshooter Effect.
• Titanic Effect: if it can't sink you don't need lifeboats: see Trading on the Titanic Effect.
• Tragedy of the Commons: we overuse common resources because it not in any individual's interests to conserve them: see Tragedy of the Financial Commons.
• Turkey Illusion: the tendency to extrapolate the past to predict the future, a turkey sees its farmer as a source of food and never anticipates Thanksgiving: see The Turkey Illusion: An Audience With Gerd Gigerenzer.
• Unit Bias: we will consume whole units of food, no matter what the unit form: see Unit Bias: Cooking, Dieting and Investing.
• Undermining Effect: our natural inclination to behave in accordance with our interests is undermined by the use of financial incentives: see Curiouser and Curiouser: Incentives Through the Looking Glass.
• Winner's Curse: winning an auction can lead to you overpaying: see Are IPO's Bitter Lemons?
• Wishful Thinking: what we want affects our beliefs about what will happen: see BB101 #2 Wishful Thinking
• The Zeigarnik Effect: we remember information about incomplete tasks twice as well as information about completed ones: see A Catalog of Investing Errors
• Zero-risk bias: we often prefer the total elimination of minor risks to the significant reduction of large ones: see Z is for Zero-Risk Bias.