Why investors are not always rational / Heymans, André

Abstract

As humans we make roughly 10 000 decisions every day. Most of these decisions are not made with our energy intensive prefrontal cortex, with which we make calculated rational decisions, but rather our reactionary impulsive faculties that reacts to environmental stimulus. Investors, like all other humans, therefore falls prey to a host of cognitive biases, leading them to make systematic errors in thinking when it comes to investment decisions. So, although not all investment decisions are irrational, there are enough of them to cause significant losses to invertor portfolios, a theme prof Heymans highlights in his address.