IMPACT OF COGNITIVE ERRORS AND EMOTIONAL BIASES ON FINANCIAL DECISION MAKING OF INDIVIDUALS’

Povzetek

The paper examines the impact of cognitive errors and emotional biases on individual   financial decision-making process and mitigation of these unprofitable biases with strong objectives to override emotions and upsurge returns. Individuals usually deviate from logic or reason that may cause they exhibit behavioral biases and these irrational beliefs or behaviors influencing the decisions of an individual. Behavioral biases include cognitive errors and emotional biases they may distracting our decisions from what is prescribed or recommended. The result of faulty cognitive reasoning is cognitive errors whereas emotional bias leads impulsive decisions and it makes blur our sense of judgment. Being human these biases will exist always. Understand the existence is the first step to encounter them and there is no way to eliminate them completely. Identify various biases and understand different measures for overcoming them in improving financial decision is the main objectives of this paper.