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Joy Roy
Aug 03, 2022
In Wellness Forum
This article is reproduced with the authorization of Hot Taiwan Girl Chat Gender , and the original text is published here Irrational behavior of retail investors Investors sometimes behave irrationally. Behavioral finance states that this behavior occurs continuously, rather than sporadically. over confidence Cognitive psychology researchers have pointed out that people often make unreasonable judgments when they are uncertain. Among these biases, the most common is that people are often overconfident, believing their judgments are right, and are overly optimistic about the future. Conneman points out that this tendency to overconfidence is especially pronounced among investors. Investors more often than other types of people exaggerate their skills and deny the existence whatsapp list of chance. They overestimate their knowledge, underestimate risk, and exaggerate their ability to control events. Conneman's experiments show that simply asking subjects about their confidence intervals can effectively revise investors' judgments of probability. So he asks the following questions: Based on your best estimate, how high will the Dow Jones be in a month's time? Next, ask you to decide on a higher value, and you are 99% (non-absolute) sure that the Dow Jones will be lower than this value in a month. Then, pick a lower number that you are 99% sure the Dow will be higher than a month from now. If properly executed, there should only be a 1% chance that the Dow will be higher (lower) than your high (low) estimate. In other words, investors should be 98% sure that the Dow Jones will be in the range of their estimates. Similar experiments have been applied to estimates of interest rates, inflation rates, and individual stock prices. In fact, very few investors can precisely set confidence intervals.
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