Emotional biases are influenced by feelings and emotion and usually related with human behavior to avoid pain and produce pleasure; arise spontaneously as a result of attitudes and feelings; are less easy to correct and can only be "adapted to".

Investors who are affected by primarily cognitive biases are likely to respond well to education. However, an education-based approach is not as useful when working with investors who display primarily emotional biases.

There are six types of emotional biases.

1. When an investor refuses to sell positions that are trading below their original cost in order to avoid realizing losses, it is known as loss-aversion bias. By contrast, loss-averse investors tend to sell "winning" investments early in order to lock in gains. Taken together, these tendencies are known as the disposition effect.

2. Most people consider themselves to be better than average in most things they do. For example, 80% of drivers contend that they are better than "average" drivers. Is that really possible? Investors demonstrate overconfidence bias by holding an irrational belief in the superiority of their knowledge and abilities. Studies show that money managers, advisors, and investors are consistently overconfident in their ability to outperform the market. Most fail to do so, however.

Self-attribution bias, a subset of overconfidence bias, is the tendency to take credit for successes (self-enhancement) and attribute the blame for failures to others (self-protection).

There are two forms of overconfidence bias:

1. Prediction overconfidence occurs when investors assign too narrow confidence intervals to their investment predictions.
2. Certainty overconfidence occurs when the probabilities associated with the outcomes are overstated.

3. In the investment world, self-control bias is the inability to put off current consumption and save for the future. Investors should create personal budgets and ensure that they have appropriate investment plans. Furthermore, the plans must be written to be reviewed regularly.

4. Status quo bias is an emotional bias in which people prefer to keep things as they are rather than make a change, even when it is necessary. In other words, they maintain the status quo. A manifestation of this bias is when employees fail to allocate pension contributions from their employer outside of the default option. The consequences of status quo bias are 1. holding an inappropriate asset allocation, and 2. failing to explore certain investment opportunities.

5. Endowment bias occurs when a person values an asset more when they own it than when they do not. In some cases, individuals may demonstrate an irrationally strong attachment to assets that were inherited from a relative.

6. Regret-aversion bias is an emotional bias in which investors avoid making judgments for fear of making a bad decision. It has two dimensions: Actions taken by people and actions that people ought to have taken.