Representative Bias Flashcards
1
Q
It is a mental shortcut that we use when estimating probabilities. When we’re trying to assess how likely a certain event is, we often make our decision by assessing how similar it is to an existing mental prototype.
A
Representative Bias
2
Q
People use unconscious mental statistics to figure out what the “average” member of a category looks like.
A
Prototype Theory
3
Q
Types of Representativeness Bias
A
Base-Rate Neglect
Sample-Size Neglect
4
Q
Harmful Effect of Representative Bias on Investors
A
5
Q
Some investors tend to rely on stereotypes when making investment decisions.
A
Base-Rate Neglect
6
Q
When judging the likelihood of a particular investment outcome, often fail to accurately consider the sample size of the data on which they base their judgments.
A
Sample-Size Neglect
