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What is Familiarity Bias

Handbook of Research on Behavioral Finance and Investment Strategies: Decision Making in the Financial Industry
The tendency to make investment decisions based on the lens of: being familiar with the investment option.
Published in Chapter:
Investor Biases in Financial Decisions
Shalini Kalra Sahi (Management Development Institute, India)
DOI: 10.4018/978-1-4666-7484-4.ch009
Financial Decisions involve making choices between various investment alternatives, with the aim of increasing the individual's net worth. The investor today is exposed to various investment options, but does not have the knowledge and capability of evaluating all the options and making a rational decision. Due to the limitation in the information processing capacities of the individuals, their beliefs and preferences, the investment decision-making process, gets biased. This chapter highlights ten such biases and throws light on how they impact investment behaviour, both positively and negatively. This understanding of investor psychology will generate insights that will benefit the financial advisory relationship. Further for Individuals, recognizing how the biases impact their financial decisions, can help create self-awareness and an understanding that would help them in better financial management, in case these tendencies are leading them to make unsatisfactory investments.
Full Text Chapter Download: US $37.50 Add to Cart
More Results
Leadership and Strategic Decision Making Under Exogenous Shocks Such as COVID-19
Is the idea that when people are faced with a choice between two gambles, they will pick the one that is more familiar to them.
Full Text Chapter Download: US $37.50 Add to Cart
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