Hersh Shefrin
- Published in print:
- 2002
- Published Online:
- November 2003
- ISBN:
- 9780195161212
- eISBN:
- 9780199832996
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195161211.003.0005
- Subject:
- Economics and Finance, Financial Economics
Wall Street strategists are susceptible to gambler's fallacy. In general, four important behavioral elements affect the market predictions of investors: overconfidence, betting on trends, anchoring ...
More
Wall Street strategists are susceptible to gambler's fallacy. In general, four important behavioral elements affect the market predictions of investors: overconfidence, betting on trends, anchoring and adjustment, and salience. Although gambler's fallacy generally afflicts Wall Street strategists, it typically does not afflict individual investors and technical analysts—they succumb to other errors. This point leads to a discussion about some of the key illusions that most people have about randomness, and why these illusions bias their predictions. Inflation adds an additional element of confusion. Less
Wall Street strategists are susceptible to gambler's fallacy. In general, four important behavioral elements affect the market predictions of investors: overconfidence, betting on trends, anchoring and adjustment, and salience. Although gambler's fallacy generally afflicts Wall Street strategists, it typically does not afflict individual investors and technical analysts—they succumb to other errors. This point leads to a discussion about some of the key illusions that most people have about randomness, and why these illusions bias their predictions. Inflation adds an additional element of confusion.
Stefan Leins
- Published in print:
- 2018
- Published Online:
- September 2018
- ISBN:
- 9780226523392
- eISBN:
- 9780226523569
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226523569.003.0005
- Subject:
- Anthropology, Social and Cultural Anthropology
This chapter deals with the financial analysts’ assumption that companies have a so-called intrinsic value that can be identified and is partly reflected in the stock price. It highlights the role ...
More
This chapter deals with the financial analysts’ assumption that companies have a so-called intrinsic value that can be identified and is partly reflected in the stock price. It highlights the role the search for new information plays in the endeavor to define such intrinsic value. In explaining how analysts frame, select, and weight information, it shows that, rather than being a straightforward activity, financial analysis is heavily influenced by what analysts perceive to be valuable information.Less
This chapter deals with the financial analysts’ assumption that companies have a so-called intrinsic value that can be identified and is partly reflected in the stock price. It highlights the role the search for new information plays in the endeavor to define such intrinsic value. In explaining how analysts frame, select, and weight information, it shows that, rather than being a straightforward activity, financial analysis is heavily influenced by what analysts perceive to be valuable information.
Roger B. Porter, Robert R. Glauber, and Thomas J. Healey
- Published in print:
- 2011
- Published Online:
- August 2013
- ISBN:
- 9780262015615
- eISBN:
- 9780262295789
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262015615.003.0006
- Subject:
- Economics and Finance, Economic Systems
This chapter summarizes and gathers together insights that come from the previous chapters. It first discusses an insight about how the government was responsible for the financial crisis and the ...
More
This chapter summarizes and gathers together insights that come from the previous chapters. It first discusses an insight about how the government was responsible for the financial crisis and the importance of a predictable monetary policy. The private sector had some responsibility according to this theory, which also postulates that regulatory failure among bank supervisors was perhaps not at fault. Instead, the FOMC level’s failure in fundamental economic analysis is blamed. The chapter then summarizes the responses those insights, such as the idea that the predictability of monetary policy is open to interpretation. The chapter then submerges into the debates and arguments for the causes of the financial crisis, going through the points of each of the previous chapters. It ends an assertion that the government sector holds more responsibility for the crisis than the private sector, and that the government seems to have not learned from the financial crisis.Less
This chapter summarizes and gathers together insights that come from the previous chapters. It first discusses an insight about how the government was responsible for the financial crisis and the importance of a predictable monetary policy. The private sector had some responsibility according to this theory, which also postulates that regulatory failure among bank supervisors was perhaps not at fault. Instead, the FOMC level’s failure in fundamental economic analysis is blamed. The chapter then summarizes the responses those insights, such as the idea that the predictability of monetary policy is open to interpretation. The chapter then submerges into the debates and arguments for the causes of the financial crisis, going through the points of each of the previous chapters. It ends an assertion that the government sector holds more responsibility for the crisis than the private sector, and that the government seems to have not learned from the financial crisis.
