How is frame dependence different from Anchoring ?

Some how I never get it. Can someone help Also…if possible… loss avesrion versus regret avoidance

This helped me to remember frame dependence so hopefully it helps you. Say you’re reading a newspaper and you see a headline about Lindsay Lohan. Before you even read it, you’re probably going to expect it to be something bad, right? Because based on your past experience you’ll probably decide the article probably isn’t about her latest charitable contributions :slight_smile: So, based on who its about, you already have expectations about what you’re going to read about her, even though in theory it could be good or bad. Anchoring, on the other hand, is sticking to the first impression/decision that you make. It’s a subtle difference but basically once you’ve decided on something its difficult to change your mind. (Also, for us Schweser users, I got an email from the google group saying that CFAI has another term for this called belief perseverence in the text, so watch out for that one!) Loss aversion and regret avoidance are also subtle differences but I think the first one has more to do with selling a stock whereas regret can be about anything (regretting the advisor you chose, wishing you had bought a stock that you didn’t, etc.) Hope this helps!

Awesome Aimee.

Aimee, isnt that first one similar to representativeness? You are approaching something with pre-concieved notion. I thought frame dependence would be in what context you percieve the news. A particular piece of information could be percived in different ways depenidng on how it is given to you. Just wondering.

Anchoring can also be thought of as in terms of when you buy a car - the sticker price/MSRP, the salesman uses the MSRP/sticker prices as the anchoring point which you as a customer try to negotiate away.

Yeah, honestly I think some of these really blur together. I got that example from one of the Schweser instructors but it does seem an awful lot like representativeness too. Maybe a better example of frame dependence would be automatically deciding a story in a tabloid is false? I can’t verify if this is true since I haven’t done any CFAI questions yet but I’ve heard there have been instances where they end up accepting more than one answer (on the essay) because some of them are so similar.

I like Aimee’s tabloid example much better for frame dependence: the context in how you receive the info affects how you perceive it.

i agree with sparty. frame dependence is how you perceive the information to be… how you frame it in your mind. the tabloid example could be representativeness or to some extent even recallability.