This behavioral finance characteristic is mentioned in one of the Scwheser Practice Exams… Is it in the curriculum? If it is, I must have missed it…
I know I’ve seen it. I am not sure if it’s not related to the fact that people are willing try their luck when they know the odds. other than that they are averse to uncertainty. I can check see where I saw it
I found it So basically they are saying that people are making mistakes in interpreting the law of large numbers for small numbers of trials. that is the probability of getting tails when flipping a coin is 50% for large numbers. So if you have out of 5 trials 5 tails on the 6th the ‘gambler’ bets on head. but for this trial the prob is just 50% and no more.
The question explains it as, “if a coin flip turns up heads 10 straight times, people begin to over estimate the odds of the next flip being tails.” or, “expecting a reversal to occur after a sector continually increases in value.” It makes sense, but I haven’t noticed the term.
I couldn’t find it anywhere either, but remember seeing something about if someone is flipping a coin and there are 5 heads in a row, they think the next one has to be tails because it’s “due”
oh, so that’s where i remember it from…the answer key. no wonder
Is it mentioned in the Schweser notes? It seems like I’ve only seen this in CFAI text.
cfai book 2 page 8 down
no i don’t think it’s mentioned in the text. but there’s another question on gambler’s fallacy in a volume 2 exam. they also have a question with that correlation x sharpe new > sharpe old formula from the text in one of their tests… it’s not covered in the schweser notes at all. wtf.
wow. so it is in the text…
cfasf1 Wrote: ------------------------------------------------------- > no i don’t think it’s mentioned in the text. but > there’s another question on gambler’s fallacy in a > volume 2 exam. they also have a question with that > correlation x sharpe new > sharpe old formula from > the text in one of their tests… it’s not covered > in the schweser notes at all. wtf. This is in the curriculum…one of the few things I’ve seen totally left out. ugh I suck at all of these behavioral classifications.
man. i actually read the curriculum for behavioral finance and didn’t remember it.
cfasf1 Wrote: ------------------------------------------------------- > no i don’t think it’s mentioned in the text. but > there’s another question on gambler’s fallacy in a > volume 2 exam. they also have a question with that > correlation x sharpe new > sharpe old formula from > the text in one of their tests… it’s not covered > in the schweser notes at all. wtf. Yeah, and there was also a triangular currency arbitrage involved in one of the questions. wtf is right.
what’s with all the swearing on this thread 
I agree this is stressful. I read the CFAI text sometime back on behavioral finance and I think I saw gambler’s fallacy but didn’t remember it 
swearing? wtf = wow that’s fun.
Ahh I am so sorry to have misunderstood. What psychological trap do I face?
the behavioural finance practice questions have been an unmitigated disaster for me. LOL bad. there’s so many different expressions spread out in so many areas… and then the first one they went to was sooooo general “heuristic-based”… i mean, LOL. give me a break!! is that snake-bitten stuff in the CFA?? it’s completely disjointed.
that heuristic bias thing was bs. it’s ok, heer, bs does not mean bullshieeet.
Gamblers falacy CFAI = Aversion to Ambiguity Schweser No idea why they are called different things, but the concepts read the same to me unless I’m missing something.
But aversion to ambiguity says that a trend is going to continue, where gambler’s falacy says that the trend is going to reverse. It seems that they are basically opposites.