In this video we covered a few behavioural biases that can hinder the ability of the portfolio manager to make the right decisions to generate positive performance. Other biases can cloud the decision to adjust existing positions. Disposition effect and Loss Aversion are examples of these biases where the legacy of past performance systematically influences the portfolio managers ability to make decisions for future performance.
Key learning objectives:
What is Narrative fallacy?
What is Loss aversion and the Disposition effect?
What is Escalation of commitment?