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Strategies & Market Trends : Joe Copia's daytrades/investments and thoughts -- Ignore unavailable to you. Want to Upgrade?

To: Joe Copia who wrote (24514)	5/2/2002 7:41:58 AM
From: Joe Copia	Read Replies (1) \| Respond to of 25711

Mere Exposure Effects and Judgement A somewhat counterintuitive finding in the scientific literature is called the "mere exposure effect," studied by Dr. Robert Zajonc, a social psychologist at Stanford University. The more frequently people see a stimulus, the more they like it, even if they are unaware of how familiar they are with the stimulus. The finding that mere exposure is related to a preference for the stimulus has been replicated in several studies. It doesn't seem to matter what the stimulus is. People have shown the effect when evaluating photographs of strangers, novel paintings, political candidates, and selections of classical music. The results are always the same, the more exposure or familiarity people have with an object, the more they like it. The effect happens even when the actual frequency of exposure occurs below a person's awareness. Although mere exposure effects have been observed in several scientific experiments, the reasons for the effect continue to be debated. One plausible explanation is that familiar surroundings are associated with safety and security, and so, humans have a natural inclination to prefer objects that have been associated with safety and security in the past. Mere exposure effects are most powerful when people are in situations where no clear alternatives exist, and they doubt their ability to resolve the situation. Many times, traders find themselves in situations where they are uncertain of an outcome. For example, they must decide which stocks or commodities to purchase, and they must decide whether the price will increase or decrease. Studies of traders have shown that mere exposure effects sometimes influence these decisions. Merely being shown particular stocks increases people's preferences for them. There are many opportunities for traders to become exposed to, or shallowly familiar, with a stock without really knowing much about them. A company or stock may have been profiled frequently by the media or a trader may have inadvertently come across the same stocks or commodities while doing research. Rather than a true familiarity and knowledge of the facts, an investor may develop a positive attitude toward the stock or commodity merely because they have been repeatedly exposed to it over and over again. Acting on this "hunch" is a bias that must be prevented. Be aware that your decision-making may be influenced by factors outside of your awareness. If you have a hunch that a stock or commodity is going to increase in value, it may only be an example of a "mere exposure effect." Double-check your facts. Make sure that you have several indicators that suggest a price increase. Avoid acting on a hunch.