Difference between escalation bias and overconfidence bias.

behavioral, difference, describe, question, between

My question is related to the Reading 54 (Efficicient Capital Market), LOS d. (Define behavioral finance and describe overconfidence bias, confirmation bias, and escalation bias.).

What is the difference between escalation bias and overconfidence bias?

Thanks

相关主题：

. A Behavioral Finance Q (V2,P48,Q5)

. Trade Date Acc. vs. Settlement Date Acc.

. minimum-variance portfolio and the glbal minimum-variance

. FSA concept question

. Sample selection bias vs. look ahead bias

johnnyBuz

CFA Candidates

Rank: 2

UID: 223269
帖子: 210
主题: 94
注册时间: 2011-7-11
最后登录: 2013-9-26

2^#

发表于 2011-7-13 13:37 | 只看该作者

Escalation bias tends to involve additional actions. For example one might buy additional shares once a stock is down, to "average down" on the price. People acting on escalation bias tends to ignore the concept of sunk cost.

Overconfidence bias doesn't necessarily involve additional actions. It is simply the tendency for people to believe they're right more often than what the evidence can justify, and to put more faith and emphasis in good news over bad news.

It was confusing the first time I came across this too.

TOP

sgupta0827

CFA Candidates

Rank: 2

UID: 223318
帖子: 243
主题: 137
注册时间: 2011-7-11
最后登录: 2013-8-23

3^#

发表于 2011-7-13 13:37 | 只看该作者

Really helpful! Thanks.

TOP

返回列表

上一主题：Traditional model vs. Money demand model

下一主题：Advice for Level 1 June test takers

Difference between escalation bias and overconfidence bias.

相关主题：

[收藏此主题] [关注此主题的新回复]

[通过 QQ、MSN 分享给朋友]