Glossary

Glossary

Term Book Chapter Definition
Representativeness Heuristic Behavioral Finance Chapter 10: Case Studies in Behavioral Finance A psychological concept where people judge probabilities based on perceived similarities. In the dot-com bubble context, investors assumed that because a few internet companies had been successful, all internet companies would succeed.
Representativeness Heuristic Corporate Finance Chapter 15: Behavioral Corporate Finance This is when probabilities are judged based on how closely something resembles an existing category, ignoring base rates.