Your browser does not support JavaScript.
Herd instinct is a behavior in which people form groups and follow the actions of others. In finance, herding occurs when investors follow the crowd rather than their own analysis. It has a history of starting large, unwarranted market rallies and selloffs that are often based on a lack of fundamental support to justify them. The dot-com bubble of the late 1990s and early 2000s is a prime example of the herd instinct at work. People can avoid herding by doing their own research, making their own decisions and taking risks. Anchoring
September 25, 2022 Anchoring is a behavioral finance term describing an irrational bias towards an arbitrary benchmark figure. Hot Hand
September 25, 2022 “Hot hand” is a concept in which people believe that after a series of successes, a person or organization is more likely to have further success. House Money Effect
September 25, 2022 The household money effect is a behavioral finance concept that people take more risks when they win than they do otherwise. Regret Theory
September 25, 2022 Regret theory refers to human behavior regarding fear of regret, which arises from people anticipating regret if they make the wrong choice. Behavioral Finance
September 25, 2022 Behavioral finance is a field of research focused on how psychological influences can affect market outcomes. Bid Size
September 25, 2022 The offer size is the amount of the security that investors are willing to purchase at the specified offer price. Hammering
September 25, 2022 A hammer is a rapid sell-off in a stock, sector, or market as a whole. Hindsight Bias
September 25, 2022 Hindsight bias is a psychological phenomenon in which a person becomes convinced that he accurately predicted an event before it happened. Home Country Bias
September 25, 2022 Country of origin bias is the tendency of an investor to give preference to companies from their country or region. Opening Cross
September 25, 2022 The opening cross is how Nasdaq determines the opening price for individual stocks that are traded on its exchange. Overreaction
September 25, 2022 An overreaction in the financial markets is when securities become overbought or oversold for psychological reasons rather than for fundamental reasons. Value Trap
September 25, 2022 Value traps are investments that trade at such low levels and present buying opportunities for investors but are actually misleading. Wallflower
September 25, 2022 In the stock market, “baby” refers to unpopular or abandoned stocks. Accepting Risk
September 25, 2022 Risk acceptance or risk containment is a conscious strategy of recognizing the possibility of small or rare risks without taking measures to hedge, hedge or avoid these risks. Alternative Trading System (ATS)
September 25, 2022 Alternative trading systems (ATS) are platforms for coordinating large purchase and sale transactions. Anchoring and Adjustment
September 25, 2022 Anchor and Adjust is a cognitive heuristic where a person starts from an initial idea and adjusts their beliefs based on that starting point. Animal Spirits
September 25, 2022 Animal spirits come from the Latin spiritus animalis: “breath that awakens the human mind.” It was introduced by the British economist John Maynard Keynes in 1936. Arbitrage
September 25, 2022 Arbitrage is the simultaneous buying and selling of an asset in different markets in order to exploit tiny differences in their prices. Arbitrageur
September 25, 2022 Arbitrageurs are investors who exploit market inefficiencies of any kind. They are necessary to ensure that inefficiencies between markets are smoothed out or kept to a minimum. Asset-Backed Security (ABS)
September 25, 2022 Asset-Backed Securities (ABS) are financial securities backed by income-producing assets such as credit card receivables, home equity loans, student loans, and auto loans. Audit Risk
September 25, 2022 Audit risk is the risk that the financial statements will be materially incorrect, even if the auditor’s report indicates that the financial statements do not contain any material misstatement. Axe
September 25, 2022 Ax (or “chopping axe”) refers to the desired position that the trader wants to take. Bandwagon Effect
September 25, 2022 The bandwagon effect is when people start doing something because it seems like everyone else is doing it. Barriers to Entry
September 25, 2022 Barriers to entry describe high start-up costs or other barriers that prevent new competitors from easily entering an industry or area of business. Basket Trade
September 25, 2022 Basket trading is a portfolio management strategy used by institutional investors to buy or sell a large number of securities at the same time.