Acute vs chronic: Behavioral tendencies that create chronic inefficiencies: 1) Beyesian Rigidity - anchoring, not changing views on new info 2) Price target revisions - upping target upon reaching initial target 3) Ebbulence cycle - getting active when markets rip, ignoring portfolio when mkts fall 4) Convoy behavior - do what your peers are doing…move in packs - “i don’t care what it costs…I want to buy the salesforce.com” 5) Process vs outcome - this one escapes me…something about good results being more driven by luck than the analysis that went into the good performance???
5 - you can have sh*tty process and still produce good results. I think of Galleon, although it wasn’t based on luck and based on insider trading.
Are there any subtle differences between Bayesian rigidity and anchoring?
Anchoring has the word adjustment in. Small adjustments are made. i.e. price target should be 55 they raise it to 52 from 50. Beyesian Rigidity according to Stall, investors fail to change view even when presented with very conflicting data. Beyesian appears to not change whatsoever.
Excellent point! I went back and reread the section in the CFAI book and you are right! Thanks. Veda
Paraguay Wrote: ------------------------------------------------------- >> Beyesian Rigidity according to Stall, investors > fail to change view even when presented with very > conflicting data. > > Beyesian appears to not change whatsoever. Same as “staus quo” ?
Not really the same as staus quo because there is no new information to deal with here as in anchoring and Bayesian rigidity. In staus quo you just let it stand and keep the old allocation. Basically you are lazy!
alta168 Wrote: ------------------------------------------------------- > Paraguay Wrote: > -------------------------------------------------- > ----- > >> Beyesian Rigidity according to Stall, > investors > > fail to change view even when presented with > very > > conflicting data. > > > > Beyesian appears to not change whatsoever. > > Same as “staus quo” ? I look at status quo more as a “set it and forget it,” or perpetual motion. Bayesian rigidity has a strong opinion about something and doesn’t change it based on new facts. Argument could be made they are buy and hold and thus Bayesian rigid, idk if that is correct or not. If I saw it on the test, Bayesian rigidity means presented with new information and still take the same case even when it is very conflicting to your view. Anchoring and adjustment takes new information, changes it is a bit but not as much as it should. (anyone else notice Anchoring and Adjustment was also called conservatism in the capital market expectations section, I put “conservatism (anchoring and adjustment)” on CFA practice exam, think that is right?) Status Quo is market is going up, no expectations of change things will continue.