Question: Although we know how risk decisions should be made, less is known on how these decisions are actually made. Decision makers are subject to behavioural

Although we know how risk decisions should be made, less is

Although we know how risk decisions should be made, less is known on how these decisions are actually made. Decision makers are subject to behavioural biases concerning how risk is perceived and managed. Behavioural finance examines how decision makers gather, interpret, and process information. These biases can corrupt the decision process leading to suboptimal results. Discuss the following behavioural biases in detail: 4.1 Overconfidence (4 marks) 4.2 Availability bias (4 marks) 4.3 Herd behaviour (4 marks) 4.4 Memory bias (4 marks) 4.5 Conservatism bias (4 marks)

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