PART TWO

Belief Perseverance Biases Defined and Illustrated

In Chapters 4 through 23, 20 behavioral biases, both cognitive and emotional, will be discussed. Two types of cognitive biases will be reviewed in Chapters 4 through 16. Belief perseverance cognitive biases will be covered in Chapters 4 through 9, and information processing cognitive biases covered in Chapters 10 through 16. Emotional biases are covered in Chapters 17 through 23.

In each of the 20 bias chapters, I use the same basic format in discussing the bias in order to promote greater accessibility. First, each bias is named, categorized as emotional or cognitive, including subtype (belief perseverance or information processing), and then generally described and technically described. This is followed by the all-important concrete practical application, where it is demonstrated how each bias has been used or can be used in a practical situation. The practical application portion varies in content, consisting of either an intensive review of applied research or a case study. Implications for investors are then delineated. At the end of the practical application section is a research review of work directly applicable to each chapter's topic. A diagnostic test and test results analysis follow, providing a tool to indicate the potential bias of susceptibility. Finally, advice on managing the effects of each bias in order to minimize the effects of biases is offered.