The foundations of behavioral finance can be traced back to the 1970s, when psychologists Daniel Kahneman and Amos Tversky started their work on studying behavioral biases in humans. Now the question arises: How did these individuals actually classify these under a different category?
Even though a $50 note has the same value as 10 $5 notes, we will invariably spend the lower value notes before we even think of touching the $50.
In a 2013 study by psychologists Jeffrey Berejikian and Bryan Early, 100 trade disputes between the US and other countries were collated and divided into two categories.
People have a strong tendency to “go with the flow” when faced with having to make a specific decision. It’s usually easier to follow the broad consensus—and a lot tougher to go against the grain.
In 1984, a study was conducted by behavioural economics psychologists Daniel Kahneman and Amos Tversky called the “theatre ticket” experiment, in which 200 participants were asked to consider the following two scenarios:
In today’s world, we are confronted by a barrage of information on an ongoing basis. Online news, television and social media are just three channels through which information of all kinds is transmitted to us that, if indiscriminately digested, would likely lead to massive overload.
Back in the mid-19th century, a famous circus clown of the time, Dan Rice, started using a bandwagon that blared out loud music for political campaigns.