Behavioural Finance

Mental Accounting

Definition

What is Mental Accounting?

Treating money differently based on arbitrary labels or sources.

Example in practice

An investor gambles a bonus while guarding salary savings, even though both are money.

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The tendency to feel losses more strongly than equivalent gains.

The tendency to overestimate one's knowledge, forecasting ability, or control.

The tendency to seek or interpret information that supports an existing belief.

Incorporating environmental, social, and governance factors into investment analysis or ownership.

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