Paraguay: Difference between Anchoring and Status Quo Bias? practice, emphasis, original, between, failure

Zesty

My understanding is Anchoring the analyst puts too much emphasis on the first information or the first forecast that was made leading to failure to *fully* incorporate changing conditions; while

Status Quo Bias is to stick with original assumptions/forecast regardless of changing condition.

However, there are many times where I was wrong in the practice exams (i.e. Anchoring when an analyst still sticks to its forecast even when there was a changing condition) and I still don't know whether there are any clear cut rules.


Anyone?



Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 07:19PM by Eazy E.

Valores

I would say:


- Anchoring: refers to the pricing of those asset (through capital market expectations)
- Status Quo Bias: refers more to the allocation of those assets.

anyone concur? or am i speaking out of my ass?

mik82

anchoring and bayesian rigidity and the 2 that really mess me up.

I think of anchoring as not fully adjusting, bayesian rigidity as not adjusting at all, status quo as a tendency not to change.

I also think of anchoring and bayesian rigidity as things analysts do in their forecasts and status quo as something defined contrib plan participants do (401k allocation - set it and forget it).

bpdulog

status quo : bias to maintain the same ole same ole.............we believe apple will continue to grow ust as it always does

anchoring : bias to give credence to first piece of research analysis: well first paper i read said apple is overpriced so im sticking with that forecast

Windjammer

status quo is more related to tempering your forecast specifically to not deviate from the pack too much... think of sheep herding and a black sheep trying to conceal its true colors

Unforseen

your definition for status quo is actually anchoring

to give you a hint: status quo is part of the DC pension plan biases and in data analysis traps. F.e. when employees stick with their original allocation even though new funds are added (or want to constant mix them on calendar year rebalancing). Or an analyst says last summer was hot, lots of ice sales, this summer starts hot, so there will be a lot of ice sales.

Anchoring would be: summer is a lot of ice sales but even though this summer is rainy, I still think there is a lot of ice sales.

anchoring is a more present over the curriculim. one key example would be if the analyst receives new information but only revises his old forecast by 10% of the impact of this information.

status quo is more like "happened last time, will happen this time, too".

A basic difference would be to me, that status quo does NOT need new information, if you simply "draw the graph further in its current direction" would be status quo.

And yes, there are no easy cut rules, but usually CFAI will ask only non-overlapping concepts in the available answers (as is promised by Schweser)

hopefully paraguay will sanction this ;-)

Windjam

mpr4437 Wrote:
-------------------------------------------------------
> status quo is more related to tempering your
> forecast specifically to not deviate from the pack
> too much... think of sheep herding and a black
> sheep trying to conceal its true colors


no this is the prudence trap

please lets all go reread vol 1

skycfa

Yeah my clear cut rule right now is "information received"?

=-(

Need a confirmation. Thanks guys!

PS - there was a question in the Schweser practice exam I did a while ago where the trend of a stock was going up despite what the fundamentals say and even the most optimistic forecaster thinks its overbought.

I put ebullience cycle for that and it turns out to be Represenativess. Ugh...



Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 07:34PM by Eazy E.

NakedPuts2011

^^ same here....i said herding mentality as it relates to ebulence cycle. They say representativeness....pointed to "trend will continue" as the indicator that it was representativeness that the past would continue.

aidebaobao

representativeness making judgements based on sterotype ..................oh a stock that goes up will continue going up