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Technology Stocks : Semi Equipment Analysis
SOXX 297.50-2.6%4:00 PM EST
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To: Jacob Snyder who wrote (50505)12/23/2010 6:40:48 PM
From: Jacob Snyder1 Recommendation  Read Replies (1) of 95368
 
Behavioral economics:

"Success in investing doesn't correlate with I.Q... Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." - Buffett

1. When faced with decisions under uncertainty, we use heuristics or ‘short cuts’ to reach a conclusion. Framing = the collection of anecdotes and stereotypes that make up the mental filters we rely on.
2. We use the emotional parts of our brains to make decisions based on risk.
3. We tend to over-estimate the importance of near-term or ‘available’ information.
4. We are overconfident, except when we have had a recent failure. We constantly exaggerate our ability to predict the future.
5. Markets are inefficient, as described by Richard Thaler en.wikipedia.org
6. TA is mostly Magical Thinking: faced with a random sequence, we see patterns, to give ourselves the illusion of control.

Fallacies:
Investors are prone to: herd behavior, loss aversion, reluctance to admit mistakes, filtering available data to confirm beliefs (or validate prior decisions), mistaking correlation for causation.
nizkor.org
en.wikipedia.org

marketsandculture.blogspot.com
en.wikipedia.org
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