Behavioral Biases in Investment Decisions Simulation

Step into the world of investment management with a twist: alongside market data, valuation models and asset allocation decisions, confront the human factor, the cognitive and emotional biases that shape real-world investment decisions.

Behavioral Biases in Investment Decisions Simulation Overview

This simulation places participants in competitive team rounds where they act as portfolio managers, analysts or investment committee members, confronted by realistic market scenarios, investor pressures and behavioural traps.

Each cycle participants will be put in situations provoking their biases. By embedding bias scenarios (such as anchoring, overconfidence, herding, loss aversion and recency), the simulation shifts the focus from “just the numbers” to “what we believe and why we behave the way we do”.

Participants see how their heuristics, shortcuts, and emotional responses influence their decisions. It is ideal for university finance programmes, MBA/EMBA cohorts, executive training and asset-management workshops seeking to deepen behavioural awareness in investing.

Behavioral Biases in Investment Decisions Simulation Concepts

Participants work through realistic scenarios, which can be customized to emphasize or exclude specific topics depending on the learning goals. This modular structure allows the simulation to be tailored to any type of session. Key concepts include:

Overconfidence bias
Loss aversion
Herd mentality or bandwagon effect
Confirmation bias
Anchoring bias
Recency or availability bias
Familiarity bias and home-bias
Disposition effect
Framing effect

Gameflow

What Participants Do

In the simulation, participants will:

Receive an investor brief, portfolio mandate and market environment
Set investment strategies, define asset allocation, select securities or funds
Set entry/exit rules and define risk limits
Make decisions under changing conditions (market shocks, new information, investor demands, peer behaviour)
Confront their decisions: identify which biases crept in, how they affected the outcome and what they would do differently
Present a debrief summarising strategy, bias-influences, lessons learned and next-round adjustments

Learning Objectives

By the end of the simulation, participants will be able to:

Learn about most common biases plaguing communication and finance world
Understand the way behavioural biases influence decisions in the context of real-world investing
Implement investment strategies with increased discipline, avoiding common bias-driven pitfalls
Reflect on their behavioural patterns and adjust to mitigate their biases
Improve collaboration in team-based investment decisions by surfacing behavioural blind spots
Prevent biases before they spread through the whole team and start to affect their decisions
Better communicate their decision-making process.
Develop a habit of post-decision review: not just “what happened” but “why did we do it this way?” and “what has influenced us?”
Build greater confidence in managing uncertainty, ambiguity and behavioural risk alongside traditional market risk

How the Behavioral Biases in Investment Decisions Simulation Works

This simulation can be run individually or in teams in academic or corporate contexts.

1. Receive a Scenario or Brief Participants receive target company financials, company data, industry metrics, consensus estimates which are tailored to provoke a specific bias.

2. Analyse the Situation They review the data and propose the best possible financial strategy.

3. Collaborate and Debate In team formats, participants compare interpretations and challenge each other’s conclusions.

4. Draft a Report Participants prepare a memo outlining proposing strategy and present it to each other or to a mock committee.

5. Biases Check The bias of this round is revealed to participants and they go through their decision-making process while being aware of the possible bias.

6. Review and Reflect Feedback highlights participants’ flexibility, ability to communicate clearly, and strategic thinking under the pressure.

Frequently Asked Questions

Who is this simulation designed for? It is ideal for finance students (undergraduate/postgraduate), MBA/EMBA participants, asset-management professionals, investment committees, and executive development programmes focused on behavioural finance.
How long does the simulation run? Typically it may be run in a 2-hour to half-day format, but can be extended to 1 full day or multiple session modules depending on depth of exploration.
Is it online-compatible? Yes. It works in digital, hybrid, and in-person formats.
Is the simulation adaptable/customisable? Absolutely. The facilitator can select which biases to emphasise, adjust time-pressure, select asset-classes (equities, fixed income, alternatives), and configure rounds to match the learner-level (undergraduate through executive).
What sort of assessment is integrated? Participants receive quantitative metrics (portfolio performance, risk/return, benchmarking) and behavioural-metrics (bias-incidence, decision-consistency, peer-ratings). Facilitators can use memos, team-presentations or peer/self-assessment as part of the graded outcome.
What equipment or infrastructure is required? A computer/laptop per participant or team, internet browser, for in-class experience having a projector can enhance experience. No special financial modelling tools are required.
What are the key take-aways for participants? Besides investment-decision skills, participants gain heightened self-awareness of behavioural traps, improved decision discipline, stronger peer-team dynamics around bias mitigation, and a sharper ability to reflect on “why we did that” in investment decisions.

Assessment

Assessment can be tailored to focus on analytical accuracy, ethical judgment, and communication. Participants may be evaluated on:

Return generated, risk-adjusted return, drawdown, volatility relative to benchmark.
Quality of asset allocation choices, alignment with mandate, responsiveness to behavioural events.
Ability to identify moments when bias influenced decisions, demonstrate corrective adjustments, document lessons learned.
Clarity of decision rationale, investor-update presentations or memos, team collaboration and role clarity.
Submission of a short post-simulation reflection or memo: “which biases did I fall victim to? What will I do differently next time?”
Participants rate their own and their teammates’ contribution, highlighting behavioural strengths and blind spots.

Assessment can combine numeric scoring, qualitative feedback, peer review, and instructor debriefing. This flexibility allows the simulation to serve both graded university courses and corporate finance training environments.