Hedonic editing

CFA Level III
#1

Is there a simple explanation of this ?

#2

damn another thing that I’ve never heard of

#3

selective recall bias would be a hedonic editing no?

#4

edit

#5

L3 sucks. I hope we don’t have to define any such arcane terms. These hit or miss questions could end up costing a lot of points.

#6

From what I remember, its under frame dependence. People integrate losses and segregate winners. So sort of like mental accounting. Sort of like bury the loser and gloat over the winner.

#7

Hedonic editing is a form of mental accounting. It is basically a way to describe how people view gains and losses. If an investor buys two stocks, loses $500 on one, and gains $1000 on another, they will net them and say the made $500. If they buy two stocks and make $1000 on the first stock and $1500 on the second, they will view both gains seperatley.

#8

After watching sports you will notice people will say about their teams: We won (after a win) They lost (after a loss) Kind of like the self attribution bias with a financial advisor.

#9

I had a little post it note in my secret sauce which said… hedonic editing: Investors prefer some frames to others

#10

So distinguishes hedonic editing from cognitive dissonance ?

#11

I think it means when investors have a different frame dependence. ie. people are not uniform in their risk tolerances.

#12

budfox427 Wrote: ------------------------------------------------------- > Hedonic editing is a form of mental accounting. > > It is basically a way to describe how people view > gains and losses. If an investor buys two stocks, > loses $500 on one, and gains $1000 on another, > they will net them and say the made $500. > > If they buy two stocks and make $1000 on the first > stock and $1500 on the second, they will view both > gains seperatley. Not exactly. My understanding is, same illustration above, the investor will “edit” the gain of $1000 in his memory to justify his investment action…hedonic editing has been applied to a gambler’s motivation to spend more money, even if there are past losses. Cognitive dissonance is conflict between action and mind and the consequential brainwashing to justfify the action