These are pretty much the same does anyone have a way to distinguish them?
not the same. Prudence is when you revise your forcasts down. Status quo comes in two flavors 1) you dont change your forcast: inflation was 5% and it will be 5% 2) DC particiapnts dont revise their allocations even though new funds are available
status quote = agree with the past prudence = agree with consensus
if you go with the flow that is herding/convoying
yes in the LOS of behavioral finance ; no in the LOS of Cap.Mkt.Expectations you have 6 psychological traps: + prudence (with consensus) + status quo (with past) + anchoring (with whatever you saw in the first time) + overconfidence + recallability + confirming evidence trap
Prudence trap occurs when you revise the estimates down/up eventhough all the indicators that you have calculated point to the contrary. For ex, if you expect the oil prices to be $60(you wish) in the next year, and all your calculations confirm it, you still use $120 estimate, then it would be prudence trap.
Ok I see but can’t status quo be constured to be prudence, you forecast the same value as the recent past, meaning you are being prudent with your forecast and keeping it status quo? I guess the difference would have to be if they stated that you thought the forecast would be X but you picked something closer to Y (which is what is has been in the past) that would be prudence while herding would be picking the forecast everyone else has. I think I have it but they are similar.
to make your logic work, you have to assume that whatever hadppened in the past was prudent, which is not necessarily right (actually history tells us it is most likely to be the opposite) person with status-quo bias (think of him is “lazy”), he doesn’t want to put to much effort in his research, and thinks whatever happened in the past is just fine person with prudence bias, wants to be cautious (he may also have traits to fear regret), he thinks it is better be safe than sorry and and takes extra precaution, so he may revise his forecast downward just to be safe, he also mistakengly thinks since everyone else is predicting something, the crowd can’t be wrong, so he tends to go with the flow, thinking that this is prudent thing to do (he may also have traits of herding)