Behavioral Gap
Version 1.0.0 · Updated 2026-07-30
CORE DEFINITION
Proposed by Carl Richards. It refers to the huge gap between the return of the investment itself and the return actually earned by the investor. The gap arises because investors are driven by emotions, buying at market highs and selling at lows.
SCAFFOLDING EFFECT
Reduce cognitive load
Controlling emotional costs. It quantifies the cost of 'fiddling around'. The best investment strategy is often extremely boring holding. To narrow the behavioral gap, we need to establish rule-based systems to constrain our emotional operations.
Anchor fast decisions
There is often a systematic deviation between people's attitudes, intentions, and actual behavior, known as the behavioral gap (attitude-behavior gap). Social desirability and situational barriers amplify this gap.
MINIMUM ACTION
In progress 0/3Practice this model in one real situation:
account_treeGenealogyexpand_more
menu_bookReferencesexpand_more
Source support: Explicit
- privatebank.barclays.comhttps://privatebank.barclays.com/insights/market-perspectives-september-09-2025/closing-the-behaviour-gap/verified
PRIVATE NOTES · Only visible to you
SAVED Q&A
ENTRY Q&A · Private saving available
Ask with a clear boundary
thinkingmodels answers from published entry context only.
Your question is sent to thinkingmodels. The answer uses public entry context only.
RELATED MODELS