Other Biases in the Behavioural Finance Literature

Abstract

This chapter deals with a variety of biases, including the gambler's fallacy, hindsight bias, panic, herd behaviour, status quo bias, survivorship bias, money illusion, attachment bias, familiarity and home bias, illusion of control, conservatism bias and narcissism. We show that narcissists are drawn to finance, law and politics and suggest that narcissistic behaviour is to blame for the global financial crisis as the narcissistic personality disorder of corporate leaders led them to substitute robust risk management for greed and personal gains by promoting self-serving and grandiose aims. We argue that money illusion is more problematical than it appears to be because governments always under-report inflation, and that the status quo bias can lead to better or less bad outcomes than otherwise.