Identification Flashcards
refers to the process by which people FIND THINGS OUT FOR THEMSELVES usually by trial and error
heuristics
often leads people to develop “RULES OF THUMB”, but this process often leads to other errors.
Trial and error
can also be defined as the “USE OF EXPERIENCE and PRACTICAL EFFORTS to answer questions or to improve performance”.
Heuristics
is still a classic description of the main heuristics that PEOPLE USE TO JUDGE probability and frequency
Kahneman and Tversky
MAKING ESTIMATES by starting from an initial value that is then adjusted TO GET THE FINAL ANSWER. The adjustment is usually insufficient.
Anchoring Heuristic
JUDGING THE PROBABILITY OF AN EVENT or the frequency of a class based on the ease with which occurrences or instances CAN BE BROUGHT TO MIND.
Availability Heuristic
PROBABILITIES ARE EVALUATED by the degree to which A is representative of B – by the degree to which A resembles B.
Representativeness Heuristic
If SOMETHING IS HAPPENING more frequently then it is less likely to happen in the NEAR FUTURE.
Gambler’s Fallacy
People prefer INDIVIDUATING or SPECIFIC INFORMATION over general ones when the former is available.
Base Rate Fallacy
People are most likely to TAKE ACTION when variance is at ITS PEAK. Then after results become more normal they believe that their action was the cause of the change when in fact it was not causal.
Regression to the mean
The EXTRA SPECIFICITIES pave the way for assessing the integrity of SOMEONES
‘S CLAIM.
Conjunction FallacyConjunction Fallacy
According to him, Representative heuristic is a JUDGMENT BASED ON STEREOTYPES.
Shefrin
refers to the TENDENCY TO FORM judgment based on stereotypes
Representativeness
is a tendency to HOLD A FALSE and MISLEADING assessment of
our skills, intellect, or talent.
Overconfidence bias
Is a PERFECTLY SENSIBLE coping strategy for life but can be problematic when investing
Optimism
is the tendency for people TO BELIEVE THAT THE ACCURACY of their forecasts necessarily increases with more information.
The illusion of knowledge
is the TENDENCY TO OVERESTIMATE our ability to influence events over which we HAVE LITTLE CONTROL
The illusion of control
CAN FEED CONFIDENCE LEVELS further. By extrapolating recent experience into the future, investors are often guilty of making confident predictions that are regularly shown to be flawed
Hindsight bias
refer to TWO OPPOSING EMOTIONAL STATES THEORIZED as factors causing the unpredictability and volatility of the stock market, and irrational market behavior inconsistent with the efficient-market hypothesis
Greed and fear
is usually described as an IRRESISTIBLE CRAVING to possess more of something
(money, material goods) than one actually needs
Greed
is usually characterized CHARACTERIZED AS AN INCONVENIENT, stressful state,
triggered by impending peril and awareness of hazard
Fear
