In this third installment of heuristics and biases, we conclude this theme by discussing some vital biases - exponential growth, amortization, self-selection, and survivorship biases.
00:00 Introduction
02:25 Compound Interest - Exponential Growth Bias (EGB)
07:46 Exponential Growth Math FV=PV*(1+r)^t
09:35 Implications of Exponential Growth Bias
11:21 Learning Present Value - Who Wants to Be a Millionaire PV=FV/(1+r)^t
16:09 Expense Fees Over Time - FV=PV*(1+r-e)^t
24:48 Amortization Bias - Tendency to Believe that We pay off loans equally over time.
27:02 Self-Selection Bias
29:34 Survivorship Bias
31:45 How Datasets Can be Manipulated
I hope you enjoy the content and learn all about the topic of Behavioral Finance. I've set up the first few podcasts as mini lectures of my Behavioral Finance course that I teach at Butler University each semester. The goal of this podcast is to provide a comprehensive look into the topic of Behavioral Finance - for free!
#behavioralfinance #psychologyofmoney #financialdecisions
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References:
Fernandes et al: Financial Literacy Driving 0.1% of Financial Behavioral https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2333898
Foltice and Langer (2014) Decision Analysis paper on How We Learn about Exponential Growth Bias
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419035
Bryan Foltice Behavioral Finance Website - www.bryanfoltice.com
Money Strong Program - www.moneystrong.net
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Disclaimer: www.bryanfoltice.com/cv
