Anchoring Bias in Finance: How It Distorts Investment Decisions and Market Prices

Behavioral Finance

Behavioral Finance · Cognitive BiasAnchoring Bias in FinanceWhy the first number you encounter distorts every financial judgement that follows — and how anchoring silently shapes asset prices, valuations, and investor behaviour.In a famous experiment, Tversky and...

Herd Behavior in Financial Markets: Causes, Examples and Economic Effects

Behavioral Finance

Behavioral Finance · Market DynamicsHerd Behavior in Financial MarketsWhy smart investors abandon their own analysis and follow the crowd — and how this collective irrationality creates asset bubbles, crashes, and market contagion.Between 1995 and 2000, the NASDAQ...

Cognitive Biases in Investing: The Complete Guide with Real Examples

Behavioral Finance

Behavioral Finance · Cognitive PsychologyCognitive Biases in InvestingYour brain was not designed for the stock market. Here are the 8 cognitive biases that systematically destroy investor returns — and what the research says about overcoming them.Studies consistently...

Prospect Theory Explained: Why Losses Hurt More Than Gains Feel Good

Behavioral Finance

Behavioral Finance · Decision TheoryProspect Theory ExplainedThe Nobel Prize-winning model that explains why losing £100 feels worse than gaining £100 feels good — and why this asymmetry shapes every financial decision you make.Imagine you’re offered two...

What is Behavioral Finance? How Psychology Shapes Investment Decisions

Behavioral Finance

Financial Economics · Behavioral FinanceWhat is Behavioral Finance?Traditional finance assumes investors are rational. Behavioral finance asks: what happens when they’re not? The answer rewrites everything we thought we knew about markets.In 1987, global stock...

Heteroskedasticity: What It Is, Why It Matters, and How to Fix It

Econometrics, Regression Analysis, Statistics

Heteroskedasticity Your coefficients are fine — but your standard errors are lying to you What even is heteroskedasticity? Let’s start with an analogy. Imagine you’re trying to predict how much money people spend on food. For someone earning £1,000 a...

Dominant Strategy in Game Theory: Definition, Examples and How to Find It

Game Theory

Game Theory · StrategyDominant Strategy in Game TheoryThe clearest solution concept in game theory — when one strategy is always best, regardless of what anyone else does.In most strategic situations, the best thing to do depends heavily on what your opponent does....

Instrumental Variables and Two-Stage Least Squares: Solving the Endogeneity Problem

Econometrics, Regression Analysis, Statistics

Instrumental Variables and Two-Stage Least Squares When your data is lying to you — and how to get the truth anyway Here’s the problem with just running a regression Imagine you want to know: does more education make you earn more? Simple — just look at the...

Zero-Sum vs Non-Zero-Sum Games: Key Differences with Examples

Game Theory

Game Theory · Core ConceptsZero-Sum vs Non-Zero-Sum GamesOne of the most fundamental distinctions in game theory — and one that determines whether cooperation is even possible between rational players.When two people negotiate a salary, does one person’s gain...

Omitted Variable Bias: How to Predict the Direction Before You Run the Regression

Econometrics

Econometrics · Causal inferenceOmitted Variable Bias: How to Predict the Direction Before You Run the RegressionYour supervisor asks “which way is it biased?” — and you can answer without collecting a single data point. Here’s...