Behavioural Traps - Framing
'Don't judge a book by its cover', or rather, it is the substance that counts, not the form. But how true is this? The reality is that we know that form is important, and behavioural finance has studied how form affects our choices. This is known as the 'framing effect', which means that the way figures or information are presented or 'framed' changes our perception and, as a result, alters the decisions we make. Watch our video to find out more.
When we make financial decisions it is easy to fall into behavioural traps; in other words, we are vulnerable to bias. What are these traps? Errors that we commit when we make decisions that are caused by unconscious decision-making processes, or cognitive biases. Such biases affect how we think and how we interpret and use information.
The eight videos - one introductory video and seven focusing on various topics - of the series on behavioural bias describe some very common mistakes we all make: present bias, mental accounting, diversification bias, the framing effect, the overconfidence effect, representativeness bias and the endowment effect.
They were produced in partnership with Università Ca' Foscari Venice, with the involvement of its students and professors. Each video starts with a brief introduction of the key concepts, then offers practical examples and presents experiments done on students and ordinary people to demonstrate these concepts in action.