Critically evaluate how cognitive dissonance influences investment decision-making
Critically evaluate how cognitive dissonance influences investment decision-making.
The term cognitive dissonance is used to describe the psychological discomfort that results from holding two conflicting beliefs, values, or attitudes. This conflict creates anxiety and discomfort because people tend to seek consistency in their attitudes and perceptions. Cognitive dissonance is the discomfort people feel when their behavior is inconsistent with their values and beliefs. It can also occur when a person holds two conflicting beliefs at the same time.
The discrepancy between what people believe and what they do motivates them to engage in behaviors that help minimize discomfort. People try to defuse this tension in a variety of ways, including refusing, explaining, and avoiding new information.
Investment decisions are well-planned actions that use financial resources to achieve the highest possible return. Decisions are made based on investment objectives, risk tolerance and type of investor. H. Whether it's an individual or a company. Investment decisions are made to achieve maximum return by allocating the right financial resources to the right opportunities. These decisions are made considering two key parameters of financial management: risk and return. The question when making an investment decision is whether today's capital expenditures will increase your income and cover your costs tomorrow. Therefore, investment decisions are investing money at different times in anticipation of future economic benefits.
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