Fundamentals of Corporate Finance with Connect Access Card
Fundamentals of Corporate Finance with Connect Access Card
11th Edition
ISBN: 9781259418952
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 22, Problem 22.1CTF

Cognitive errors are best explained as errors in __________.

Expert Solution & Answer
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Summary Introduction

To determine: The cognitive errors

Introduction:

Cognitive error: It is irrational or exaggerated thought process that is expected to perpetuate the consequences of psychopathological states, especially anxiety and depression. These thinking are said to strengthen emotions or negative thoughts.

Answer to Problem 22.1CTF

Cognitive errors are best explained as errors in reasoning.

Explanation of Solution

In behavioral finance, the objective is to understand and explain how reasoning error influence financial decisions. More research is done in behavioral financial areas stems from work in cognitive psychology that studies several aspects of behavior such as financial managers thinking, reasoning, and decision making. When there is error in reasoning, it is known as cognitive errors.

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