Models.Behaving.Badly.: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life
Emanuel Dermanamazon.com
Models.Behaving.Badly.: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life
FIGURE 11-8: HISTORICAL ODDS OF STOCK MARKET CRASH WITHIN ONE YEAR This trader must make a call—buy or sell. Then the market will crash or it will not. So there are four basic scenarios to consider. First, there are the two cases in which he turns out to have made the right bet: The trader buys and the market rises. In this case, it’s business as u
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stock-market strategies that seem too good to be true usually are. Like the historical patterns on the frequency of earthquakes, stock market data seems to occupy a sort of purgatory wherein it is not quite random but also not quite predictable. Here, however, matters are made worse because stock market data ultimately describes not some natural ph
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I don’t think we’ll ever be able to fully explain why bubbles occur. It’s like asking why wars occur—there are almost always several reasons, many of them conflicting, all of them controversial. It’s too complicated a subject for simple answers. But let me propose one reason they happen that both goes overlooked and applies to you personally: Inves
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The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. We claim that this assumption is false—indeed, obviously false. In fact, we do not think that anyone believes it on reflection. Suppose that a chess
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