Behavioural finance

Why the Human Brain Is a Poor Judge of Risk -:

"And it's not just risks. People are not computers. We don't evaluate security trade-offs mathematically, by examining the relative probabilities of different events. Instead, we have shortcuts, rules of thumb, stereotypes and biases -- generally known as 'heuristics.' These heuristics affect how we think about risks, how we evaluate the probability of future events, how we consider costs, and how we make trade-offs. We have ways of generating close-to-optimal answers quickly with limited cognitive capabilities. Don Norman's wonderful essay, Being Analog, provides a great background for all this."