What the disposition effect causes — investors sell winners too early and hold losers too long

What anchoring does in investing — the purchase price biases your sell decision

Anchoring bias causes investors to base sell decisions on initial purchase price rather than current market value

What recency bias does — overweighting recent events in investment decisions

Recency bias leads investors to prioritize recent market trends over long-term historical data

How does the concept of leverage in financial markets influence the risk-return tradeoff for investors?

Leverage amplifies potential returns but also increases risk exposure in financial markets

What Long-Term Capital Management's failure showed — even Nobel Prize-winning models can blow up

Nobel models can't always predict extreme market events

What Buffett means by 'Only when the tide goes out do you discover who's been swimming naked'

Exposes investors' lack of prudent risk management

What the endowment effect causes — you value what you own more than what you don't

The endowment effect leads to overvaluation of owned items compared to identical alternatives