Behavioral Bias Within The Decision Making Process

Abstract

Behavioral finance studies how subjective behavioral elements introduce distortions in the individual’s decision-making process.  The empirical study of systematic errors in cognitive reasoning and perception, and ultimately what these errors reveal about the individual’s underlying thought processes, is often referred to as investor heuristics and biases.  This paper investigates the cognitive biases and heuristics to which business students are subject. This was achieved by administering a questionnaire and collecting empirical evidence about both undergraduate and graduate business students’ own perceptions of bias.  The psychological phenomenon known as bias and its presence in human decision making, both financial and non-financial, will provide additional insight on the subject of investor irrationality and broaden the ideals of rationality assumed in classical financial theory.