| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 2766 Registered: 05-2011 Rating: N/A |
Richard Thaler (Chicago Booth) Nobel Prize winner on Behavioral Economics in a recent interview this weekend: Who can be a better person to learn from who spent 40 years researching and especially working with genius like Daniel Kahneman and Amos Tverskly. Which elements of behavioral economics do you find particularly relevant now? (Some titbits) I think the biggest mistake people make, and one that we are very much seeing over the past six months, or so is OVERCONFIDENCE. People think that they are better than average at almost everything. Why is that relevant now? Well, one of the interesting things we observed in the past six months is a big increase in retail investing at the level of individual securities. My opinion is, for individual investors to be doing that is a fool's errand. The world has conspired to make them OVERCONFIDENT now because the market's been going up pretty steadily, and it has been going up fast in the segment of the market that retail investors have been most attracted to. So, it's very easy to that you've figured this stuff out. If you think you've figured it out right now, think again. The other thing we that we often point to is what we call LOSS AVERSION. People are much more sensitive to losing money than to gaining. What that's going to mean is when we do get to a correction in the stock market, we may see some overreaction. People should be vary of that, as well |