Managerial Irrationality

Rohit Tiwari (20378)

Paridhi Jain (20365)
Azadi Kandulna (20329)
BEHAVIOURAL FINANCE
 Introduction
Managers are apparently "irrational" and focus on simple heuristics rather
than concentrating on statistical outcomes in their decision-making
processes. 
Types of Managers
(On the basis of
Emotional Difference)
TYPES OF DECISION ?

1) Rational (Logical) 

2) Irrational

3) Non Rational
Behavioural Aspects of Mangers:
Types of Mangers:
#1 Self-Deception
The concept of self-deception is a limit to the way we learn. When we mistakenly think we know more than we actually do, we tend to
miss information that we need to make an informed decision.

#2 Heuristic Simplification
We can also scope out a bucket that is often called heuristic simplification. Heuristic simplification refers to information-processing
errors.

#3 Emotion
Another behavioral finance bucket is related to emotion, but we’re not going to dwell on this bucket in this introductory session.
Basically, emotion in behavioral finance refers to our making decisions based on our current emotional state. Our current mood may
take our decision-making off track from rational thinking.

#4 Social Influence
What we mean by the social bucket is how our decision-making is influenced by others.
 Types of Managerial Biasness that lead to
Irrational Decision Making Persona
among managers:

Related 1.) Overconfidence

2.) Regret

Biasness 3.) Anchoring Bias

4.) Framing Bias
5.) Hindsight Bias
6.) Limited Attention
Span 7.) Chasing Trends
Hubris Hypothesis
Overconfidence
Believeing in the ability and
experience more than facts
and figures.
Isolation Lack of
Accountabilty
Not challenging the authority due Mangers having excessive
to deference in the authority powers to disown their own
actions
 Limitations:

Lack of systematic approach in solving

hypothesis. Limited to only fragment sectors or
areas or business

Scope and Lacks deeper understanding to address flexibility.

Limitation
s