Evaluation of Psychological Biases in the Financial Framework

Abstract

Behavioral finance accepts psychology as method and takes many variables of psychology. These variables, which are mainly referred to as short cuts and biases, have been integrated into financial researches to understand financial decision making and risk taking behaviors. However it is seen that there are no evaluations other than simple definitions and brief explanations of biases. This deficiency leads to inadequate and incomplete creation of the models and limited interpretation of the findings. The aim of this study is to examine the relatively less studied biases in the financial context, to put forward the reasons and results, to refer to its relationship with other biases, to emphasize the effect on financial decisions and especially on risk taking. The biases discussed in this framework; hindsight, self control, recency, endowment and the status quo.