Behavioural Finance

Representativeness Bias

Definition

What is Representativeness Bias?

Assuming a small pattern or resemblance reliably predicts a broader outcome.

Example in practice

A company is labelled the next market leader after one strong quarter.

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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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