Same q from afternoon sample exam 2 / Q: state whether the PM’S sale of all the energy stocks is an example of anchoring or gamblers fallacy. I thought it is anchoring but the answer was gamblers fallacy. From what has happened in the past (past average price was cheaper ) you try to think it will go back is to me, “anchoring”. Ans given: Gambler’s fallacy is a belief in extreme mean reversion. Am I wrong or missing something?
PM sold all the funds energy stocks as the price per barrel of oil rose above 40$ . She expects oil prices to fall to the 20$ to 25$ per barrel range. Gamblers fallacy is more like you guess from what is coming from two urchin. This above sentence tells me that he is looking the past avg price, so is it not anchoring. It is difficult to choose but if you have to choose either of gambler or anchoring, reversion to mean I would say anchoringBBBBB@@
No, Anchoring would have been if information came out the Oil Prices will drop to $20/barrel and she held at $40 b/c she believed it would have kept going up. Gamblers Fallacy I think is a stretch but, I guess if you flip a coin 10 times and its heads you are expecting a Tails. So for the price of Oil, if its going up, up, up, up, you are expected it to Go Down at some point.
Thanks, I understand the logic now. I hope I can think that way on the exam day…