My understanding is Anchoring the analyst puts too much emphasis on the first information or the first forecast that was made leading to failure to *fully* incorporate changing conditions; while Status Quo Bias is to stick with original assumptions/forecast regardless of changing condition. However, there are many times where I was wrong in the practice exams (i.e. Anchoring when an analyst still sticks to its forecast even when there was a changing condition) and I still don’t know whether there are any clear cut rules. Anyone?
I would say: - Anchoring: refers to the pricing of those asset (through capital market expectations) - Status Quo Bias: refers more to the allocation of those assets. anyone concur? or am i speaking out of my ass?
anchoring and bayesian rigidity and the 2 that really mess me up. I think of anchoring as not fully adjusting, bayesian rigidity as not adjusting at all, status quo as a tendency not to change. I also think of anchoring and bayesian rigidity as things analysts do in their forecasts and status quo as something defined contrib plan participants do (401k allocation - set it and forget it).
status quo : bias to maintain the same ole same ole…we believe apple will continue to grow ust as it always does anchoring : bias to give credence to first piece of research analysis: well first paper i read said apple is overpriced so im sticking with that forecast
status quo is more related to tempering your forecast specifically to not deviate from the pack too much… think of sheep herding and a black sheep trying to conceal its true colors 
your definition for status quo is actually anchoring to give you a hint: status quo is part of the DC pension plan biases and in data analysis traps. F.e. when employees stick with their original allocation even though new funds are added (or want to constant mix them on calendar year rebalancing). Or an analyst says last summer was hot, lots of ice sales, this summer starts hot, so there will be a lot of ice sales. Anchoring would be: summer is a lot of ice sales but even though this summer is rainy, I still think there is a lot of ice sales. anchoring is a more present over the curriculim. one key example would be if the analyst receives new information but only revises his old forecast by 10% of the impact of this information. status quo is more like “happened last time, will happen this time, too”. A basic difference would be to me, that status quo does NOT need new information, if you simply “draw the graph further in its current direction” would be status quo. And yes, there are no easy cut rules, but usually CFAI will ask only non-overlapping concepts in the available answers (as is promised by Schweser) hopefully paraguay will sanction this 
mpr4437 Wrote: ------------------------------------------------------- > status quo is more related to tempering your > forecast specifically to not deviate from the pack > too much… think of sheep herding and a black > sheep trying to conceal its true colors no this is the prudence trap please lets all go reread vol 1
didnt read any of the above so apologies if i am repeating but to really simplify it: status quo bias: cant let go of the past and think what happened before will continue to happen anchoring: cant let go of past analysis but not completely entrenched in it, so you are letting new ideas change your mind but not fully (whereas with status quo bias, you are adimantly opposed to altering your viewpoint at all) baysian rigidity: stubborn views no matter what others say to you (differs from status quo bias because it does not necessarily imply that you believe that past performance will continue…wheras with status quo you hold to stubbon viewpoint AND that viewpoint is historical performance)
Yeah my clear cut rule right now is “information received”? =-( Need a confirmation. Thanks guys! PS - there was a question in the Schweser practice exam I did a while ago where the trend of a stock was going up despite what the fundamentals say and even the most optimistic forecaster thinks its overbought. I put ebullience cycle for that and it turns out to be Represenativess. Ugh…
^^ same here…i said herding mentality as it relates to ebulence cycle. They say representativeness…pointed to “trend will continue” as the indicator that it was representativeness that the past would continue.
representativeness making judgements based on sterotype …oh a stock that goes up will continue going up
anchoring: not fully incorporate news, not fully adapt, not fully response, always partially status quo: the year before was 4%, last year was 4%, so next year gonna be 4% rigidity view: you will make a strategic plan even you just wanna date a girl. You define first step, second step, alternative step, etc, and stick to it refuse to accept flexibility. my opinion.
The behavioral finance stuff is a pain. It might help to know that the material was written by a few different authors, hence the cross over terms and different meanings. It’s hard to keep all of this stuff in your head at once, but hopefully the real questions will be presented in a fairly straight forward manner. The past exam questions on this aren’t that bad and typically list a number of behaviours and ask you to circle and justify rather than identifiy from scratch. Status quo bias appears twice. From the DC pension perspective, it is that people are just too lazy to change whatever boxes they ticked on day 1 of their employment. This differs from the other use, in psychological traps (i think), where people just assume current events will continue. Anchoring is more to do with your first opinion on something weighing more heavily despite new information. One other comment re something above… Representativeness can be thought of as a ‘good company’ (ie, well managed, socially and ethically responsible, etc) not necessarily representing a ‘good investment’.
overconfidence – limited or narrow range of possibilities admitted
I think some of the issue lies in that there are three kinds of “behavioral finance biases”: biases, behavioral sources of chronic market inefficiency, and psychological traps of forecasting. Apparently, according to Schweser (in the “for the exam” box on p. 83 of the Capital Markets Expectations Chapter), if two traps/sources/biases are effectively the same thing and are explained well, the grader will give you full credit. For instance, Schweser says that the prudence trap can be explained in terms of regret minimization, so long as you articulate your reasoning well. Now, to be safe, what I’d do is list the behavioral characteristic in the context of the question - e.g. if the problem is talking about forecasting, go with the traps. Specifically for this questions, I think the difference between the status quo bias and anchoring bias is very clear. Status quo bias is not bothering to analyze new information and simply go with your existing forecast because it is easier and counteracts the fear of regret. Anchoring is during the decision making process, you weight information you get first more than information you get later.
Status quo is giving more weight to resent observations. Market was down last year so it is gong to be down next year. Anchoring is market crashed in 1929 and now I don’t wanna invest anymore because I think it will crash again. Easy stuff guys
prudence doesn’t have a precedent or basis – just cautious for sake of being cautious regret-minimization – has gone through a bad time , wants to avoid further woes
Prudence is you temper your forecasts down because u don’t wanna look like an idiot. Like if I built a model and it said the Apple stock is going to triple in price next year but everyone is saying it will only move up 10%, I temper my forecast down to say 15%
u right JP , that’s the intent in Sample 1 question
”Anchoring is market crashed in 1929 and now I don’t wanna invest anymore because I think it will crash again.“ I think this should be recallability trap.