I always end up confusing the two
that helps. Thanks
One way to look at this difference too - conservatism is one of the belief preservation biases, while anchoring is information processing - both cognitive. So, there can only be an information processing error if the information is processed (or attempted to be processed at least). Sounds ridiculous and simple, but I think it could be that fine of a difference. In conservatism, the information is not processed - it is just disregarded and the old belief is preserved. If the new information was considered (and subsequently there may or may not have been any adjustment made), but the analyst/whoever kept their former view that they were set on - and you have anchoring.
how do we then differentiate status quo bias ?
Hey, well status quo is an emotional bias, vs conservatism and anchoring being cognitive. Still has the same result (and pretty much path) as conservatism, where an outlook is not changed and new information is not regarded. I believe the difference is WHY nothing is done and what drives that reason. If emotions/more spontaneous or reactionary, it would be status quo. If say an analyst thinks that new info is irrelevant and does not process it. conservatism. If the drive to not do anything is connected to past experiences, that would probably be emotional/status quo. Throwing out a small outline of these differences…not positive about this though. If anyone has any additional insight, please share/correct this. Hope we don’t have to differentiate between conservatism and status quo on the exam. They seem VERY similar.
anchoring - Processing information and deciding to not incorporate it, keeping old view intact. Ex - new home sales data comes out. Analyst looks at the data and determines that there is nothing in the report that warrants a change to his estimates for GE.
conservatism - Deciding to not process information and keeping old view intact. Ex - new home sales data comes out. Analyst decides that this data point does not affect his estimates for GE, without looking at the actual data.
status quo - Not addressing whether to process information and basically ignorning it/couldn’t be bothered or “feels” that it is not relevant (vs giving it some thought and deciding on irrelevance)…keeping old view intact. Ex - new home sales data comes out… Analyst hates new homes/or “feels” that it is not relevant, based on intuition and not logic, and doesn’t consider the data point at all. (ridiculous example, but trying to illustrate).
That’s my understanding…not necessarily right though. Def navigating the nuances here…