Behavioral Biases in Active Equity Investing

In the realm of active equity investing, behavioral finance plays a crucial role in influencing investor decision-making and market behavior. Consider a scenario where an equity portfolio manager, Jane, has consistently outperformed the benchmark for the last five years. Recently, Jane has begun expressing doubts regarding the sustainability of this performance due to the increasing volatility in emerging markets, coupled with concerns about potential overvaluation in the tech sector. This situation has drawn the attention of her clients, who are increasingly anxious about their investments in light of recent market corrections.

Discuss the impact of behavioral biases on Jane's investment decisions in this context. Analyze how her perceptions and those of her clients may be affected by biases such as loss aversion, overconfidence, confirmation bias, and herd behavior. Additionally, propose strategies that Jane can employ to mitigate these biases in her investment decision-making process while communicating effectively with her clients.