Do you think you are a better driver than your friends? Is common sense ingrained in our veins? It appears not. In the 1970’s psychologists started proving we repeatedly make irrational judgements and decisions in similar circumstances. In fact, 93% of Americans surveyed thought they were a better driver than the median. That is not our common sense shining through, but one of many behavioral biases, and in this case illusory superiority.
Uncertainty
We each suffer from behavioral and cognitive biases and during times of uncertainty, like Covid-19, they expand their influence through our reactions and quick decisions. In the time span I wrote, edited, and re-wrote this article I witnessed multiple biases. They included social proof, attribution bias, political bias, authority bias, status quo bias, confirmation bias, recency bias, certainty effect, illusion of control and I likely missed more than I noticed.
Awareness
As we learn more about the specific behavioral biases it becomes easier to notice them in others, but recently I have started to notice them more in myself. For instance, I read a headline about Tom Hanks, who I know little about, and care to know even less. The headline read, “Tom Hanks tests positive!” As I finished the short headline, I immediately felt more susceptible to catching Coronavirus myself. It did not matter that Tom was in Australia, or that the headline did not mention the Coronavirus disease. My immediate reaction was shaped by recency bias, herd behavior, and authority bias. These biases quickly led me to conclusions that were not based on facts.
Overcome the Bias
I do not want to be biased and I do not want you to be either. It is necessary to identify the biases in and around us so that we can begin to overcome them. Since diving into behavioral finance, I have found more than 316 types of behavioral and cognitive biases that affect our personal finances, investments, and everyday lives. Our research has already begun and you can dive right in with one of our prior posts on Loss Aversion, Illusion of Control, Home Bias, or Issues with Thinking Fast.
Join the Journey
I listed out each of the 316 biases below and if one intrigues you, leave a comment here or tweet me @HITInvestments. I will prioritize our research and write about the most intriguing biases first. There are only 312 more to learn about, if you are not already subscribed, join us on our perpetual learning journey here.
316 Behavioral and Cognitive Biases
(At initial publication there were only 315)
| Action Bias – Making Trouble Where There is None, 10 Examples of Action Bias, Lottery Stocks |
| Adverse Selection – 15 Examples of Adverse Selection |
| Affect Heuristic – 11 Examples Of The Affect Heuristic |
| Age Related Positivity – A Two-Decade Reflection on Happiness and the Age Positivity Effect |
| Akerlof’s Lemons – 15 Examples of Adverse Selection |
| Ambiguity Aversion – The Cost of Comfort – 8 Examples of Ambiguity Bias In Our Financial Decisions |
| Ambiguity Effect – The Cost of Comfort – 8 Examples of Ambiguity Bias In Our Financial Decisions |
| Anchoring – Pull the Anchor! 3 Examples of Investing Anchor Bias |
| Anthropocentric Thinking |
| Anthropomorphism |
| Arbitrary Coherence |
| Attention, Limits Of |
| Attentional Bias – Why Extraordinary Investors Avoid Winners |
| Attraction Effect |
| Attribute Substitution |
| Attribution Bias |
| Authority, Appeal To |
| Automation Bias |
| Availability Cascade – Why Extraordinary Investors Avoid Winners |
| Availability Heuristic – Why Extraordinary Investors Avoid Winners |
| Babe Ruth Effect |
| Backfire Effect |
| Bad Events |
| Bandwagon Effect |
| Barnum Effect |
| Base Rate Fallacy |
| Beauty Effect |
| Belief Bias |
| Ben Franklin Effect |
| Benford’s Law |
| Berkson’s Paradox |
| Bernoulli’s Errors |
| Bird In The Hand Fallacy |
| Blind Spot Bias |
| Bounded Rationality |
| Bystander Effect |
| Certainty Effect |
| Choice Deferral |
| Choice Overload |
| Choice-Supportive Bias |
| Clever Hans Effect |
| Clustering Illusion |
| Cocktail Party Effect |
| Cognitive Depletion |
| Cognitive Dissonance |
| Cognitive Ease |
| Collective Belief |
| Commitment Bias |
| Compassion Fade |
| Confirmation Bias |
| Congruence Bias |
| Conjunction Fallacy |
| Conservatism (Belief Revision) |
| Continued Influence Effect |
| Contrast Effect |
| Conversational Bias |
| Courtesy Bias |
| Critical Evaluation |
| Curse Of Knowledge |
| Cursedness |
| Data Mining Errors |
| Data Snooping Bias |
| Decision Fatigue |
| Decision-Making |
| Declinism |
| Decoy Effect |
| Default Effect |
| Defensive Decision Making |
| Denomination Bias |
| Denomination Effect |
| Depression |
| Disappointment Aversion |
| Disaster Myopia |
| Disposition Effect |
| Distinction Bias |
| Diversification Bias |
| Dread Risk |
| Dunning–kruger Effect |
| Duration Neglect |
| Dynamic Inconsistency |
| Easier To Process |
| Easterlin Paradox |
| Economic Reflexivity |
| Effort Justification |
| Ego Depletion |
| Elimination-By-Aspects |
| Empathy Gap |
| Emperor’s New Clothes Syndrome |
| End-Of-History Illusion |
| Endowment Effect |
| Expectation Bias |
| Experimenter’s |
| Expert Intuition |
| Exposure-Suspicion Bias |
| Extreme Aversion |
| Fallacy Of Composition |
| Fallacy Of Division |
| Fallacy Of Frequency |
| False Memory |
| Familiarity Effect |
| Fear Of Missing Out (Fomo) |
| Focusing Effect |
| Focusing Illusion |
| Forer Effect |
| Formulation Effect |
| Framing |
| Framing Cognitive Bias |
| Framing Effect |
| Frequency Illusion |
| Functional Fixedness |
| Fundamental Attribution Error |
| Galatea Effect |
| Gambler’s Fallacy |
| Group Attribution Error |
| Group Of People |
| Group Polarization |
| Groupthink |
| Habit |
| Halo Effect |
| Handicap Principle |
| Hard–easy Effect |
| Hawthorne Effect |
| Hedonic Adaptation |
| Herd Behavior |
| Hidden Messages |
| Hindsight Bias |
| Home Bias – Should You Expand Your Investment Universe? |
| Hostile Attribution Bias |
| Hot-Cold Empathy Gap |
| Hot-Hand Fallacy |
| Human–robot Interaction |
| Hyperbolic Discounting |
| Identifiable Victim Effect |
| Ideomotor Effect |
| Ikea Effect |
| Illicit Transference |
| Illusion Of Control – How The Illusion of Control Bias Impacts Investing |
| Illusion of Understanding |
| Illusion Of Validity |
| Illusory Correlation |
| Illusory Pattern Recognition |
| Illusory Superiority |
| Illusory Truth Effect |
| Impact Bias |
| Implicit Association – 10 Actions to Take at Work |
| In-Group Bias |
| Information Bias |
| Information Overload |
| Insensitivity To Sample Size |
| Instant History Bias |
| Inter-Group Bias |
| Internet Filter Bubble |
| Introspection Illusion |
| Intuitive Predictions |
| Irrational Escalation Or Escalation Of Commitment |
| January Effect |
| Jevons’ Paradox |
| Lake Wobegone Effect |
| Law Of Large Numbers |
| Law Of Small Numbers |
| Law Of The Instrument |
| Less-Is-Better Effect |
| Less-Is-More Effect |
| Licensing Effect |
| Limit Order Effect |
| Linda Problem |
| Longshot-Favorite Bias |
| Look-Elsewhere Effect |
| Loss Aversion – 15 Examples of Loss Aversion |
| Low Volatility Anomaly |
| Man In The Moon |
| Man With A Hammer Syndrome |
| Mental Accounting |
| Mere Exposure Effect |
| Mere Possession Effect |
| Mindlessness |
| Minsky Moment |
| Money Illusion |
| Monte Carlo Fallacy |
| Monty Hall Problem |
| Moral Credential Effect |
| Moral Hazard |
| Moral Licensing |
| Motivation Crowding Out Effect |
| Myopic Loss Aversion |
| Naive Diversification |
| Narrative Fallacy |
| Negativity Bias – The Rogue Wave of Reality: Confronting Narrative Bias in Business and Life |
| Negativity Effect |
| Neglect Of Probability |
| Noise Trading |
| Normalcy Bias |
| Not Invented Here |
| Obsequiousness Bias |
| Observer Bias |
| Observer-Expectancy Effect |
| Omission Bias |
| Optimism Bias |
| Optimism/Pessimism Bias |
| Ostrich Effect |
| Outcome Bias |
| Overconfidence Effect – Why Extraordinary Investors Avoid Winners |
| Overjustification Effect |
| Pain Of Paying |
| Pareidolia |
| Parkinson’s Law Of Triviality |
| Partitioning |
| Peak-End Rule |
| Person Or Thing |
| Persuasion Bias |
| Pessimism Bias |
| Phenomenon |
| Placebo Effect |
| Planning Fallacy |
| Pluralistic Ignorance |
| Pollyanna Principle |
| Positive Outcome Bias |
| Positivity Bias |
| Post-Purchase Rationalization |
| Present Bias |
| Priming |
| Pro-Innovation Bias |
| Procrastination |
| Projection Bias |
| Prospect Theory |
| Pseudo-certainty Effect |
| Psychological Resilience |
| Publication Bias |
| Pygmalion Effect |
| Rare Events |
| Ratio Bias |
| Reactance |
| Reactive Devaluation |
| Recall |
| Recency Illusion |
| Reciprocity |
| Records Played In Reverse |
| Reflection Effect |
| Regression Bias |
| Regret |
| Regret Aversion |
| Representative Heuristic |
| Representativeness Heuristic |
| Resource Depletion |
| Restraint Bias |
| Reverse Psychology |
| Revise One’s Belief |
| Rhyme As Reason Effect |
| Risk Aversion |
| Risk Compensation |
| Risky Shift |
| Room Effect |
| Rosy Retrospection |
| Round Number Effect |
| Sailing-Ship Effect |
| Salience Bias |
| Satisficing |
| Scarcity |
| Seersucker Illusion |
| Selection Bias |
| Selective Perception |
| Self Serving Bias |
| Self-Control |
| Self-Enhancing Transmission Bias |
| Self-Serving Attribution Bias |
| Self-Serving Bias |
| Semmelweis Reflex |
| Sexual Over-perception Bias |
| Sharpshooter Effect |
| Simulation Heuristic |
| Singularity Effect |
| Social Comparison Bias |
| Social Desirability Bias |
| Social Intelligence Hypothesis |
| Social Norms |
| Social Proof |
| Stated Multiple Times |
| Status Quo Bias |
| Stereotyping |
| Subadditivity Effect |
| Subject-Expectancy Effect |
| Subjective Validation |
| Suddenly Appears Everywhere |
| Sunk Cost Effects |
| Sunk Cost Fallacy |
| Superbowl Effect |
| Superstition |
| Surrogation |
| Survivorship Bias |
| System Justification |
| Texas Sharpshooter Effect |
| The Curse of Knowledge and Hindsight Bias |
| The Dunning-Kruger Effect |
| The Forer Effect (a.k.a. The Barnum Effect) |
| The Sunk Cost Fallacy |
| Third-Person Effect |
| Time Discounting / Present Bias |
| Time-Saving Bias |
| Titanic Effect |
| Tragedy Of The Commons |
| Truthiness |
| Turkey Illusion |
| Unacceptability Bias |
| Undermining Effect |
| Unit Bias |
| Valence Effect |
| Von Restorff Effect |
| Weber–fechner Law |
| Well Traveled Road Effect |
| Winner’s Curse |
| Wishful Thinking |
| Women Are Wonderful Effect |
| Zeigarnik Effect |
| Zero Price Effect |
| Zero-Risk Bias |
| Zero-Sum Bias |
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