## 2 Cognitive Biases in the Stock Market: Literature Review
This cognitive bias was addressed in Q8 of the survey: \"You prefer to choose a low-return, guaranteed investments rather than a more promising investment with higher risk\". **Availability cascade** is recognised as a self-reinforcing cycle in which a specific idea or belief gains rapid currency in popular discourse; its rising popularity makes people more likely to believe it and to spread it further among society. This bias mainly occurs due to the combined effects of two distinct components: informational cascades and reputational cascades [24] (in the case of stock exchange investors, this would start with the verification of decision based on the findings of social media reports and announcements broadcasted by news agencies). When these two types of cascades happen simultaneously on a large scale and strengthen each other, a phenomenon is triggered whereby a piece of news or information is repeated and widely circulated. The result is an availability cascade, where investors regularly spread a specific chunk of data or a particular belief while increasing the opportunity for others to do likewise. Accordingly, an availability cascade is a kind of positive-input framework, since the greater the number of individuals bringing attention to an idea, and the more time they spend doing so, the more others are inclined to do the same. In particular, when the rising prevalence of a specific belief is such that it reaches a specific minimum amount and passes this threshold, the attention it draws is sufficient to set off a chain response, which makes it increasingly indisputable. [PERSON] et al. [25] have examined how the recency and availability of information regarding others' actions within and between different communities have a significant role to play in the allocation of attention and evaluations. They have demonstrated how widely available and recent information interacts to influence people's attention and evaluation, which is a foundation of the availability heuristic. They have also shown that market investors use the information gained from others' activities to handle the unpredictability of the market. By definition, it advances directional research on how imitative characteristics affect market activities. Their study emphasised how the public impact is conveyed through homogenised practices, social networks, and learning. Yet, they illustrated a more widespread procedure of social effects based on the core activities carried out by a group of market investors, their collaborative motion and direction, and the market roles of various actors. Their study also offers \"additional insights into the cognitive biases of persistence and change in social systems that may not be apparent when a researcher is studying these systems from a purely structural point of view or considering interactions within a single community.\" This cognitive bias was addressed in Q10 of the survey: \"You read in the news that the company you invested in experienced a high level of trading on specific days. You buy more stocks of the company in the upcoming days\". **Gambler's fallacy** is the expectation that a random sequence of outcomes should exhibit systematic reversals and that a long series of the same results are of low probability. It occurs very regularly, especially for inexperienced investors. [PERSON] [26] explained it as a phenomenon that takes place when an individual wrongly believes that a particular stochastic event is less likely to occur based on the outcome of a preceding event or series of events. This evaluation is incorrect, since past occurrences do not change the probability that certain events will occur in the future. [PERSON] [27] describes this bias as \"an (incorrect) belief in negative autocorrelation of a non-auto correlated random sequence. For example, individuals who are prone to the gambler's fallacy believe that after three red numbers appearing on the roulette wheel, a black number is 'due' that is, it is more likely to appear than a red number\".