Greed and Fear

social

Fear in financial decisions may result from the unknown, from change, or from the possibility of collapse. When combined with greed, it can lead to increased risk-taking. In general, when combined with our tendency to react quickly and impulsively to emotional stimuli (“emotional reactivity”), it has been found to be negatively correlated with successful trading.

NoteExamples

Bubbles and crashes

Think of market bubbles and crashes!

“Everyone is selling!”

Also relates to:Information Cascades · Availability Cascades · Extrapolation Bias · Loss Aversion · Affect Heuristic · Social Contagion