Behavioral Finance: Definition & Applications


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How is behavioral finance defined?

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1. On a typical trading day, the stock market drops on news of the Federal Reserve raising the interest rates. The market loses 200 points. By the end of the trading day, there was never an interest rate hike. What can you expect to happen to the market the next day?

2. When you sell stock or react financially to news indirectly related to your interest that is called?

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About This Quiz & Worksheet

Find out how much you know about applying behavioral finance with this quiz and worksheet. Answer questions on specific subjects like the definition of behavioral finance and making predictions based on stock market activity.

Quiz & Worksheet Goals

Use the quiz and worksheet to address your comprehension of the following:

  • A reaction to financial news that indirectly affects your interests
  • Staying informed on market conditions
  • How to deal with business/personal finance

Skills Practiced

  • Information recall - access the knowledge you've gained regarding personal and business finance and ways of maintaining these areas of interest according to your investments
  • Making connections - use understanding of the concept of fluctuations in the stock market and how it's connected to financial news
  • Reading comprehension - ensure that you draw the most important information from the related lesson on applying behavioral finance

Additional Learning

Staying informed on the financial markets can be important when it comes to protecting your investments for the future. The lesson named Behavioral Finance: Definition & Applications will teach you more about it via these areas of study:

  • An analogous example of 'picking teams' and how that relates to behavioral finance
  • Rises and declines in the stock market and how to respond to both
  • Maintaining discipline with regard to your investment strategies