Advertisements

Category: Behavioral Finance


The Undoing Project

I recently completed reading this fabulous book, generally I try to review the book, but this time I have shared some quotes from the book and they are absolutely hilarious: –

  1. “Doubt is not a pleasant condition, but certainty is an absurd one.” -Voltaire
  2. “Daryl Morey suggested a new definition of the nerd: a person who knows his own mind well enough to mistrust it.” (31)
  3. “Danny said, “I’ve always felt ideas were a dime a dozen. If you had one that didn’t work out, you should not fight too hard to save it, just go find another.”” (73)
  4. “Later when he was a university professor, Danny would tell students, “When someone says something, don’t ask yourself if it is true. Ask what it might be true of.” That was his intellectual instinct, his natural first step to the mental hoop: to take whatever someone had just said to him and try not to tear it down but to make sense of it.” (82)
  5. “At some point it didn’t matter: He compelled himself to be brave until bravery became a habit.” (94) Continue reading
Advertisements

blogI’ll give you some examples, followed by comments. Since this article is about learning, let’s start with this:

“What we learn from history is that people don’t learn from history.” When investors get either too fearful or too greedy, they sometimes hide behind the notion that “This time it’s different.” Usually they regret it.

On fear and greed

“Two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. … We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” This is the simple recipe for being a contrarian investor. Continue reading

Back from the long Diwali holidays, time to reboot on the markets, long breaks are always good to revive and get blogsome thoughts from your near and dear ones.

On the way back from Bhopal to Mumbai, some fellow passengers were curious about the markets and the train was late as much as 6 hours. It was a holiday special train and passengers paid a premium to board the train compare to other routine trains, they expect the train to come on time as the fare is higher. I did exchange few tweets with the railways department for delayed train.

Getting back to the theory as the fellow stranger passengers did not have a good time with markets as well, most of them were trying to time the market. Continue reading

In one classic experiment conducted by Daniel Kahneman and Amos Tversky, pioneers in the field of blogprospect theory, subjects were given a hypothetical choice between a sure $3,000 gain versus an 80% chance of a $4,000 gain and a 20% chance of not getting anything.

The vast majority of people preferred the sure $3,000 gain, even though the other alternative had a higher expected gain (0.80 × $4,000 = $3,200).

Then they flipped the question around and gave subjects a choice between a certain loss of $3,000 versus an 80% chance of losing $4,000 and a 20% chance of not losing anything. In this case, the vast majority chose to gamble and take the 80% chance of a $4,000 loss, even though the expected loss would be $3,200. Continue reading

%d bloggers like this: