Bias mix-ups

CFA Level III Portfolio Management
#1

I’m doing some practice problems and want to know explicit differences on how each of these biases differ from each other from a testing standpoint.

Confirmation vs Representativeness

For confirmation, are you specifically seeking criteria that fits your view of the world? For representativeness, is it more of a reaction to markets/price performance that you think represent the long term behavior, but is really short term behavior?

Regret Aversion vs Loss Aversion

If the situation is someone selling winners too early, which is that more closely aligned with- Regret Aversion or Loss Aversion? On one hand, I’m thinking Loss Aversion can be either of the holding losers/selling winners behavior (but tested more for holding losers), whereas Regret Aversion is the herding behavior where you don’t want to miss out on winners that other people are holding onto.

Availability vs. Herding

When following word of mouth or name recognition, would you go with herding or availabiity? Seems to kind of fit both, but with just that context, is it closer to Availability? I know Herding has a nuance of regret aversion to it, but not sure what the difference is.

#2

Smagician? Anyone??

#3

Arg radio silence :frowning:

#4

On the Loss aversion vs regret aversion, I think about it in terms of a value vs decision

Loss aversion is viewing a possible VALUE loss being worse than an EQUAL value gain. (Value loss>same gain)

Regret aversion is around a DECISION that you did or did not make. Not much focus on the value (omission vs commission)

#5

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#6

My understanding:

Confirmation - you only pay attention to information that are positive to your strategy, and ignore the negatives.

Representative - you take one piece of information (can be old/new info) and think it alone can represent future performance (could be positive/negative).

#7

Confirmation vs. Representativeness Looking for evidence to support ones belief. Rep. Is either attaching too much importance to the recent info.( base rate neglect) or none At All(sample size neglect) Loss aversion vs. Regret aversion Regret aversion has a priori