I’m still struggling to distinguish Representativeness/ Availability/ Recallability.
“The tendency of forecasts to be overly influenced by events that have left a strong impression on a person’s memory, particularly in the case of catastrophic or dramatic past events” should belong to which one?
Representativeness or recallability trap, respectively.
Thanks! Can someone explain what’s the main difference between these three? Very similiar…
Representativeness is when based on a particular event in the past an opinion of a similar event in future is formed. The main point here is that the probability of such an event happening may be ignored or the sample size considered may be too small making the probability of the event seem higher than what it actually is.
Availability is simply bias resulting from estimating a probaility based on how easily it comes to mind. For example getting biased due to advertsiing.
Hope this clears things a bit.
^ Availability Bais is also a result of easily accesible information driving the decision making process.
Representative bias is about applying a simple observation as being ‘representative’ of the larger observation set. For example, if you walked into a store during the Holidays and saw little foot traffic and thought “wow this years seasonal sales are going to be really bad due to how little people are shopping” you would be suffering from representative bias.
Recability bias is when you relate a current observation to a prior event that is ‘recalled’ easily. It’s a bias because this past event is relates to the observations of today and is assumed outcome of the past will reoccur.
Thanks 1988 and Galli.
Start to have some feeling now…
Even if Galli’s explanation is the great, for me I though representativeness and recalability are kind of synonyms?
For native speaker probably easier to distigulish, for us… 
!
2007 AM EXAM, below bold show which kinds of bias? Representativeness, Availability or Recallability?
John Nultione was recently hired as a portfolio manager with Equity Advisors (EA). As part of his responsibilities, Nultione prepares market forecasts for the firm’s chief investment officer, Walt Hyatt. The U.S. equity market declined by 20 percent last year. After constructing a model of factors affecting the market, Nultione becomes convinced that U.S. market returns will be 13.47 percent for the first half of this year followed by an 11.21 percent return for the second half of this year. Nultione remembers similar conditions several years ago when his forecast was too pessimistic and he missed a significant buying opportunity. He does not want to miss another market low.
Recallability trap since some bad past events have an influence on his recent decisions. See Galli’s post.
btw: I found coincidentally this: http://cfatutor.me/2013/10/02/behavioral-finance-cognitive-errors-belief-perseverance-biases/ Maybe a nice overview…
Thanks!
By the way, one finding is that I can’t find any “Recallability” wording from 2015 CFA curriculum but it did show up in the past CFA exam…
Not sure if the new version (2015) curriculum delete the recallability trap?
Recallability is not deleted in 2015. It shows up in another book as Recallability Trap…I believe Vol. 3 where it talks about Challenges in Economic Forecasting under Psychological factors.
Thanks! Find it, it’s in book3 Economic Analysis… under 2.2.8 psychological traps. Another new trap, prudence trap, was introduced here.
Representative is after the first whiskey shot.
availabilty is after the first whiskey on ice.
recall is after you reach your current limitations.
Representativeness People seek to look for similar patterns in new information Types of Representativeness Bias: a) Base-rate neglect bias: b) Sample-size neglect bias Availability: a) Retrievability b) Categorization c) Narrow range of experience d) Resonance The recallability trap is one of psychological traps in forecasting.