CH06 Correcting Behavioral Biases

FIN3399— Behavioral Finance
Special Topics in
Finance
Behavioral Finance
Winter Intersession Chapter 6 –

2022 Correcting Cognitive
and Emotional
Dr. Hind Lebdaoui
Errors
Correcting Cognitive and Emotional Errors
Human-behavior and financial-facts knowledge are

correcting tools
Investors can acquire such knowledge formally, as in investment classes,

or informally, as by investment media and experience
Financial experts gain their expertise over time by acquiring human-

behavior and financial-facts knowledge and using the reflective System 2
to process it
Correction by expertise
Expertise allows eventual reliance on the intuitive System 1, bypassing

System 2, in predictable environments such as meteorology or chess,
where quick and precise feedback readily corrects cognitive and
emotional errors
Expertise requires explicit use of the reflective System 2 in less

predictable environments where quick and precise feedback is scarce
Financial professionals, like psychotherapists and intelligence officers,

know much about particular companies, patients, and international
conflicts,
and they may receive quick and precise feedback about short-term
outcomes,
but the feedback they receive about long-term outcomes is delayed,

sparse, and ambiguous, promoting confidence in choices without
promoting quality of choices
It makes little sense to turn all people into experts in medicine,

investments, or home appliances,
but it makes much sense for non-experts to correct their cognitive and
emotional errors by following experts’ advice
Do you choose generic aspirin or Bayer aspirin? Why?
Do you choose generic acetaminophen or Tylenol? Why?
Do you choose index funds that aim to match the market or active funds
that aim to beat it? Why?
Store-brand drugs are generic, costing less than national brands although
generally equal in quality
Pharmacists bought national-brand drugs less than 9% of the time while

average consumers bought them 26% of the time
People lacking college education were especially likely to buy national

brands
Health-care professionals -- including nurses and doctors -- were more likely

to buy store brands than lawyers, who have the equivalent amount of
education but not equal pharmaceutical expertise
Two thirds of finance professors choose index funds that deliver market-
matching returns
Most investors, however, choose active funds that promise market-

beating returns
How do you know who’s an expert?
How do you know who are good plumbers?
How do you know who are good physicians?
How do you know who are good financial advisers or money managers?
Correction by financial advisers
Financial advisers can guide investors well, providing human-behavior

and financial-facts information and correcting cognitive and emotional
errors
Advisers can point out the cognitive errors of availability and hindsight
when mutual fund advertisements are about to steer clients into funds
with high recent returns but unlikely high future returns
They can point out the emotional errors of exaggerated fear when these
errors threaten to steer clients into selling all their stocks after stock
market crashes
Correction by Prompting Use of System 2
We vary in susceptibility to cognitive and emotional errors and resulting

investment errors
Some of this variation is rooted in our genetics
Genetic factors explain up to 50% of the variation in susceptibility to

investment errors
Correction by Prompting Use of System 2
Intelligence prompts us to use the reflective System 2, but the tendency

to use System 2 is more closely related to disposition for reflection than
to intelligence
Intelligent people are better able to use System 2 to correct

overconfidence and hindsight errors than less intelligent ones,
but they are no better able to correct anchoring errors or overcome the
resistance to realizing losses
Correcting framing errors
For undergraduate students: Make a list of as many as possible

objectives and benefits of an ideal internship or an ideal job
MBA students were asked to list their objectives for summer internships
Students used System 1, framing the question narrowly and listing 7

objectives on average,
such as “improves my attractiveness for full-time job offers” and “helps

me develop my leadership skills”
Next, the objectives listed by all students were combined into a master
list of 29 objectives
Students were prompted to use System 2 to frame the question once

more after reviewing the 29 objectives in the master list
This time students listed 15 objectives on average,
implying that engaging System 2 prompted students to add 8 objectives

they considered important but were not prompted by System 1
Correcting anchoring errors
Recall the airport runway and double-decker bus experiment described

in Chapter 3
People estimated the price of a double decker bus as higher when told
that the length of the runway is 7,300 meters than when told that it is
7.3 kilometers.
The length of the runway is the “anchor” in this experiment and the
price of a double-decker bus is the “target”
Anchors affect estimates of targets by highlighting features shared by the

anchor and the target,
and obscuring features of the target that differ from those of the anchor
Air transportation is a feature of runways, whereas
Ground transportation is a feature of buses

Proper framing highlights differences between the features of anchor

and target
Making the length of runway less prominent in the evaluation of the

price of a bus weakens the chain that links the length of the runway to
the estimate of price of the bus
Proper framing also corrects anchoring errors when it makes us consider

many anchors rather than one
Plausible anchors for the price of a double-decker bus, such as the price of a
single decker bus, exert greater influence on estimates than implausible
ones, such as the length of a runway
People facing multiple anchors evaluate the plausibility of each anchor

relative to the others
People facing the length of a runway as one anchor for the price of a double-
decker bus and the price of a single decker bus as another anchor choose the
price of a single decker bus as an anchor because it is more plausible
Correcting hindsight errors
Prospective hindsight is a System 2 method that corrects hindsight errors
An investor considering concentrating her portfolio in the biotechnology

sector might be guided to ask: Imagine that we are a decade from now,
why did biotechnology stocks yield lower returns than other stocks?
Such a question elicits potential causes for failure that do not come to
mind easily when using System 1
Correcting over-precision errors
What is the current level of the S&P 500 Index?
What is your best estimate of the level of the index a year from now?
What is your 67% confidence interval around your estimate?
(Pick a pair of S&P 500 Index values such that there is a 67% probability -
a 2 out of 3 chance - that the values of the S&P 500 Index a year from
today would be higher than the low value but lower than the high value)
The general “wisdom-of-crowds,” method, even wisdom-of-crowds-

within oneself, can correct overprecision errors
What is your best guess for the S&P 500 Index level at the end of 2020?
Now assume that you are wrong. What is your next guess?
The average of two guesses is generally more accurate than either guess
Wisdom-of crowds is more accurate than wisdom-of-crowds-within
An average of the guesses of two people is generally more accurate than
an average of two guesses of one person
Correcting self-control errors
Whereas people with insufficient self-control are overly eager to indulge,

people with excessive self-control are excessively reluctant to indulge
Reflect on your behavior and the behavior of others
Can you identify insufficient or excessive self-control in yourself and in

others in financial choices and behavior and in choices and behavior outside
of finance?
What methods do you and people you know adjust self-control up when it is
insufficient, and down when it is excessive?
Properly calibrated 80% confidence intervals of future S&P 500 Index

returns contain the realized return in 80% of forecasts
Yet 80% confidence intervals by corporate chief financial officers

manifest overprecision errors, containing the true return only 33% of the
time
Two methods correct overprecision errors:

One splits the question into parts, asking for 10% and 50% confidence
intervals before asking for those at 80% confidence levels
This prompts people to use System 2 and acknowledge that an 80%

confidence interval must be wider than a 10% or 50% confidence interval
Another asks people to estimate confidence intervals first for one month
in the future and then two months in the future before asking them to
estimate confidence intervals for three months in the future
This makes time explicit, highlighting the uncertainty of estimates and

leading people to better calibrated confidence intervals, knowing that
three-month confidence intervals are likely wider than those of two-
month intervals and those for two-months are likely wider than those of
one-month
Correcting representativeness errors
We commit representativeness errors when we believe in the “law of

small numbers,” a tongue-in-cheek offshoot on the robust “law of large
numbers”
One manifestation of belief in the law of small numbers is that 6 years of

beating the market are interpreted as representative of a skillful mutual
fund manager as much as 30 years of beating the market
Insensitivity to predictability exacerbates representativeness errors
Variation in the quality of meals at a restaurant tends to be small

whereas variation in the performance of a mutual fund tends to be large
We can predict quite accurately the quality of future meals at a

restaurant by the quality of 6 past meals,
but we cannot predict nearly as accurately the future performance of a

mutual fund by performance in 6 past years
Consider judging the probability that a particular mutual fund manager

would generate returns exceeding benchmark returns
Analysis free of representativeness errors guides us to examine both

representativeness information about the returns of this particular fund
relative to its benchmark,
and base-rate information about the returns of all funds relative to their
benchmarks
Judging by representativeness information alone, we might be tempted

to conclude that a manager who beat the benchmark 6 years in a row
provides clear evidence of skill at generating returns exceeding
benchmark returns
After all, the chance of 6 heads in 6 flips of a coin is only one in 64.
But once we note that base-rate information indicates that few mutual
fund managers beat their benchmarks consistently over years and know
that this fund manager is one among hundreds or thousands of fund
managers in the population of funds, we understand that it is likely that
there would be lucky fund managers who beat their benchmarks 6 times
in a row as there are lucky coin flippers who flip 6 heads in a row
Yet investors, even professional institutional investors, continue to

neglect base-rate information
Institutional investors prefer active money management over passive
money management
In particular, institutional investors trust their judgment about the
application of representativeness information in identifying skilled
money managers
Stated reasons for preferring active management include whether a
handful of skilled active managers can be identified and combined to
generate market-beating returns
In contrast, stated reasons are only vaguely associated with base-rate
information about the performance of the average manager
Peter Lynch managed Fidelity’s Magellan fund during the 13 years from
1977 to 1989
Representativeness information includes the observation that Lynch beat

the S&P 500 Index in 11 of the 13 years
Base-rate information includes the observation that if 500 coin flippers

flip 13 coins each, the winner will on average flip 11.63 heads
Correcting confirmation errors
Consider 4 cards (Wason’s question)
D F 7 5
Assume that each card has a letter on one side and a number on the
other
Which card or cards should you turn over to find if they satisfy the rule:
“If a card has a D on one side, then it has a 7 on its other side”
Most people choose to turn over the card with the letter D on one side,
searching for confirming evidence
Some choose to turn over the card with the letter F on one side or the
one with number 7
The correct answer calls for turning over the card with the letter D on
one side to see if it confirms the rule by having the number 7 on the
other
But the correct answer also calls for turning over the card with the
number 5 on one side to see if it disconfirms the rule by having the letter
D on its other side
Some choose to turn over the card with the letter F on one side or the one with number 7
These can offer neither confirming nor disconfirming evidence because there in nothing in
the statement relating to what is on the other side of cards with the letter F,
and there is nothing in it indicating that cards with letters other than D on one side cannot
have the number 7 on the other
But few choose to turn over the card with the number 5 that can offer disconfirming
evidence by having the letter D on the other side
Proper framing, such as by the box of positive and negative hits and false
positive and negatives or by concrete and familiar settings, helps correct
confirmation errors
The frame of Wason’s question is abstract and unfamiliar
Consider a concrete and familiar analog to Wason’s cards in four cards

marked:
Beer Diet Coke 23 Years Old 19 Years Old
Which card or cards would you turn over to find if they satisfy the rule: “If a
person drinks beer, then that person is 21 or older”?

More than abstraction and unfamiliarity make the frame of D, F, 7, 5 more prone
to confirmation errors than the frame of Beer, Diet Coke, 23 Years Old, 19 Years
Old.
Evolutionary psychologists argue that the second frame activates a “cheater
detector” module embedded into our brains by evolution
That module is proficient at detection of cheaters on social contracts
Consider the social contract rule “If an employee gets a pension, then that
employee must have worked for the firm for at least 10 years”
You face four cards:
Pension No Pension Worked 12 Years Worked 8 years
• Some people were told that they are the employer in the story whereas
others were told that they are the employee. Those told that they are the
employer were better at detecting cases where the employee cheated, receiving
a pension despite having worked only 8 years, whereas those told that they are
the employee were better at detecting cases where the employer cheated,
providing no pension to an employee who worked for 12.

More than abstraction and unfamiliarity make the frame of D, F, 7, 5
more prone to confirmation errors than the frame of Beer, Diet Coke, 23
Years Old, 19 Years Old
The second frame activates a “cheater detector” module embedded into
our brains by evolution
That module is proficient at detection of cheaters on social contracts
Consider the social contract rule “If an employee gets a pension, then
that employee must have worked for the firm for at least 10 years”
You face four cards:
Pension No Pension Worked 12 Years Worked 8 years
Some people were told that they are the employer in the story whereas
others were told that they are the employee
Those told that they are the employer were better at detecting cases
where the employee cheated, receiving a pension despite having worked
only 8 years
Those told that they are the employee were better at detecting cases
where the employer cheated, providing no pension to an employee who
worked for 12
Double-blind tests of candidate drugs in the pharmaceutical arena

counter confirmation errors
Some patients receive the candidate drug whereas others receive
placebos
Both physicians and patients are blind to whether the administered drug
is the candidate drug or not
Health improvements in patients who receive the candidate drug are
confirming evidence of its effectiveness.
Equal health improvement in patients who receive the placebo are
disconfirming evidence, casting doubt on the candidate drug’s
effectiveness
Double-blind tests are not always feasible
Consider a university admissions committee admitting only candidates

who meet the selection criteria
A truly fair examination of the hypothesis that the selection criteria are
valid requires admission of such candidates despite failure to meet the
selection criteria, so as to ascertain their eventual success under
conditions identical to those of candidates admitted because they have
met the selection criteria
(Many object to double-blind tests of medicines because it deprives

some of a medicine, giving them a placebo instead)
Correcting availability and representativeness errors
Quantitative models are powerful correcting methods
Michael Lewis’s book, Money Ball, describes the application of such

models to evaluating professional baseball players where intuitive
evaluations are biased by cognitive errors
Recruiters and team managers commonly commit availability and

representativeness errors by overweighting players’ easily available
recent performance and perceived similarity to other players
Quantitative models and algorithms regularly outperform human

judgment
A linear model for selecting applicants to a graduate program combines

student performance with other features such as grade-point-average,
Graduate Record Examination scores, quality of undergraduate
university attended, and strength of recommendation letters, and
specifies the weight of each feature for the best forecast of the
performance of future students
An investment model may be based on the inputs of profitability,

financial stability, susceptibility to bankruptcy, and margin of safety The
model simplifies the investment selection process and helps avoid
cognitive errors that might degrade the selection process
Yet people regularly prefer human judgment over quantitative models

and algorithms, and lose confidence in algorithmic forecasters faster
than they lose confidence in human forecasters after seeing them make
the same mistake
Correcting insufficient self-control
Love of projected older selves can bolster insufficient self-control
People who saw computer pictures of their faces as they would look
when old were more likely to choose future monetary rewards over
immediate ones
Prompts encouraging consumers to consider the future outcomes of

their present decisions were also effective among people with
insufficient self-control
“Commitment devices” offer incentives that bolster self-control
These includes placing savings in accounts that prevent premature

withdrawals,
imposing deadlines with penalties to deter procrastination on
coursework,
and placing money in accounts that would be forfeited if we
commitments are not fulfilled
Correcting hindsight regret errors

Consider receiving a coffee mug as a gift that is yours to keep.
How much would you be willing pay for such a mug if you were to buy
one?
And how much would you ask for the mug if you are to sell it? If you are
like most people you are likely willing to pay a lower amount, say $6, for
the mug if you are to buy it than the amount, say $10, you ask for the mug
you own if you are to sell it.
We know this tendency as the endowment effect. It is as if the act of being
endowed with an item enhances the item’s worth in the eyes of a person
who owns it. But what rationale underlies the endowment effect?
Correction of the “endowment effect” illustrates the use of System 2 to
counter emotional errors, specifically the emotional error of regret. We do
that by reducing our sensitivity to the pain of regret by “thinking like a
trader.”
Commitments with SticKK.com include losing weight, cleaning a living

space, learning Japanese, waking up on time, and using absolutely no
drugs (cocaine, opiates, or alcohol)
Users commit an amount money that would go to a group they abhor if
they fail to fulfill their commitments
Referees verify that commitments have indeed been fulfilled before
money is returned to users.
One satisfied user wrote: "I have lost over fifty pounds to date with my
Stickk.com contract. I've lost weight before, but I have never been as
motivated as I have been with Stickk”

“Temptation bundling” bundle wants such as reading the Hunger Games,
with shoulds such as going to the gym
People in a temptation bundling group could listen to iPods containing
four audio novels of their choice only when exercising at the gym
Other people could listen any time but were encouraged to listen only
while exercising
Yet other people received a gift certificate whose value is approximately
equal to the cost of borrowing four audio novels
People in the first group were most likely to exercise at the gym,
followed by people in the second group and people in the third
Prize-Linked Savings (PLS) accounts are a temptation bundle, bundling

the want of winning a lottery with the should of saving
Holders of Prize-Linked Savings accounts receive little or no interest on

their accounts
Instead, they are entered into lotteries that pay lucky winners more than
they could have received as interest
Consumers in Nebraska who were offered Prize-Linked Savings accounts

directed gambling money into savings
Correcting excessive self-control
Whereas people with insufficient self-control are overly eager to indulge,

people with excessive self-control are excessively reluctant to do so
They benefit from commitment devices that counter excessive self-
control
Women were offered a choice between a spa package valued at $80, or
$85 in cash
Most chose the spa package, explaining that they were afraid that
excessive self-control would drive them to spend the cash on utilitarian
products such as groceries if they did not commit themselves to the
indulgence of the spa.
Correcting by incentives
Incentives are not always effective in correcting cognitive and emotional

errors
Indeed, incentives can backfire in sports and test-taking, reducing

performance by increasing anxiety and heightening tendencies to
replace reliable formulas with idiosyncratic ones in attempts to improve
performance
The effects of accountability in this context are similar to those of

incentives
Accountability improves performance where effort improves

performance, but it is not effective alone in correcting cognitive and
emotional errors
The double edge of incentives is evident in loan officers’ choices
Large incentives promote greater screening effort and more profitable

lending decisions, but the effect of incentives is limited when
compensation cannot be clawed back if loans go sour
Moreover, incentives distort the assessment of credit risk, even among

trained professionals with many years of experience
Incentives encouraging poor advice can induce poor advice even when
incentives are removed.
Half of financial adviser recommended an inferior investment to clients
when offered a bonus for recommending it
Only 4% of advisers who were not offered a bonus recommended it
The effect of the bonus persisted after it was removed.
Advisers who were offered a bonus for recommending the inferior
investment were almost 6 times more likely to recommend it after the
bonus was removed than advisers who were never offered the bonus
Advisers who were offered a bonus were even more likely to choose the
inferior investment for themselves, likely because of wants for the
expressive and emotional benefits of a positive self-image of being
incorruptible
Readiness for Correction

Correction requires a readiness for correction
Availability of good financial advice is a necessary but not a sufficient

condition for acquiring human-behavior and financial-facts knowledge
and correcting cognitive and emotional errors
Swiss investors who need financial advice most, were least likely to seek
it
German investors who need financial advice most, were least likely to
obtain it
Having financial information did not help Dutch investors make good
retirement-savings choices
Fatigue and distraction hamper choice readiness because they hamper

activation of System 2
Fatigued people find it difficult to perform tasks requiring self-control
and distracted people are more likely to succumb to temptation
Poverty hampers activation of System 2 because scarcity distracts
attention from important future needs, directing it to today’s pressing
needs
This results in over-borrowing that increases the difficulty of climbing
out of poverty
Visceral influences such as hunger also hamper choice readiness
The sad caricature of justice as “what the judge ate for breakfast” can be
true, even among experienced judges
It is good to postpone choices when depleted, fatigued, angry, aroused,

hungry, or distracted
Yet we are not always aware of our lack of readiness and we often resist
correction when it conflicts with our wants
Correcting by evidence
Evidence-based-medicine and evidence-based-investing are useful

correcting methods
Some resistance to evidence-based-medicine and investing stems from

differences in equally valid evidence-based studies that differ in
conclusions
Other resistance, however, stems from challenges that evidence-based-

medicine and investing pose to the autonomy of physicians and
investment professionals, their incomes, and their status
Exploiting Can Trump Correcting
Banks, hotels, health clubs, mutual fund companies, and credit card
companies can help correct the cognitive and emotional errors of their
customers
Yet many of these firms choose to exploit their customers’ errors, such as
by hiding information or shrouding it
Knowledgeable people free of cognitive and emotional errors infer that

hidden or shrouded prices are likely high prices
Thus providers of products and services choose to reveal information in

markets where all people are knowledgeable
Providers might choose to hide or shroud information in markets where

not all people are knowledgeable, thereby exploiting the errors of their
less knowledgeable customers rather than correcting them
The Mexican government adopted a fee index, combining mutual funds’

initial fees and ongoing management fees, aimed at correcting the errors
of people who fail to consider the total cost of their mutual fund
accounts
Fund companies, however, did not respond by lowering fees. Instead,

they shrouded them to minimize the index
This response erased gains to people as a whole, and redistributed fees

from high-income people who pierced the shrouds placed by mutual
fund companies and calculated the true fees, to low-income people who
did not
Conflicts of interest induce some advisers to misguide investors rather

than guide them well
Trained auditors met financial advisers, presented their portfolios, and

asked for advice
Some portfolios reflected investment errors in line with the financial

interests of the advisers, such as choosing high-cost active mutual funds
Other portfolios reflected good investment strategies yet counter to the

interests of advisers, such as choosing low-cost index funds
Advisers failed to correct the errors of investors and often reinforced

errors that conformed to their interests
Correcting, nudging, and mandating
Cognitive and emotional errors mislead people on the way to satisfying

their wants
We correct – debias - cognitive and emotional errors when we point
people toward their wants
Wants, however, are different from shoulds.
We nudge when we press people toward their shoulds.
And we mandate when we shove people toward their shoulds
Mandates are paternalistic as they do not allow people to resist by

opting-out
Nudges are “libertarian-paternalistic,” as they allow people to resist by

opting-out
Corrections are libertarian when people ask for them and libertarian-
paternalistic or paternalistic when people do not

Conflicts of interest induce some advisers to misguide investors
rather than guide them well
Trained auditors met financial advisers, presented their portfolios,
and asked for advice
Some portfolios reflected investment errors in line with the
financial interests of the advisers, such as choosing high-cost
active mutual funds
Other portfolios reflected good investment strategies yet counter
to the interests of advisers, such as choosing low-cost index funds
Advisers failed to correct the errors of investors and often
reinforced errors that conformed to their interests
Readiness for correction
In your experience, what hampers readiness for correction?
Is it ignorance about facts, financial or otherwise? Is it ignorance about

human behavior?
Is it fear of change, such as a career change?
Is it hunger, hampering self- control, as when using items from the mini-bar
at a hotel?
Is it the effort required to use System 2, as when foregoing reading a

contract?
What are the differences between correcting, nudging, and mandating

and how are they related to the differences between libertarianism,
libertarian-paternalism, and paternalism?
What are some examples of correcting, nudging, and mandating in

finance and beyond it? (e.g., Correcting errors by teaching financial facts
and human behavior, nudging toward healthy diets, mandating people
away from illegal drugs)

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FIN3399— Behavioral Finance

Winter Intersession Chapter 6 –

Human-behavior and financial-facts knowledge are

Investors can acquire such knowledge formally, as in investment classes,

Financial experts gain their expertise over time by acquiring human-

Expertise allows eventual reliance on the intuitive System 1, bypassing

Expertise requires explicit use of the reflective System 2 in less

Financial professionals, like psychotherapists and intelligence officers,

but the feedback they receive about long-term outcomes is delayed,

It makes little sense to turn all people into experts in medicine,

Do you choose generic aspirin or Bayer aspirin? Why?

Do you choose generic acetaminophen or Tylenol? Why?

Pharmacists bought national-brand drugs less than 9% of the time while

People lacking college education were especially likely to buy national

Health-care professionals -- including nurses and doctors -- were more likely

Most investors, however, choose active funds that promise market-

How do you know who’s an expert?

How do you know who are good plumbers?

How do you know who are good physicians?

Correction by financial advisers

Financial advisers can guide investors well, providing human-behavior

Correction by Prompting Use of System 2

We vary in susceptibility to cognitive and emotional errors and resulting

Some of this variation is rooted in our genetics

Genetic factors explain up to 50% of the variation in susceptibility to

Correction by Prompting Use of System 2

Intelligence prompts us to use the reflective System 2, but the tendency

Intelligent people are better able to use System 2 to correct

Correcting framing errors

For undergraduate students: Make a list of as many as possible

Correcting framing errors

Students used System 1, framing the question narrowly and listing 7

such as “improves my attractiveness for full-time job offers” and “helps

Correcting framing errors

Students were prompted to use System 2 to frame the question once

This time students listed 15 objectives on average,

implying that engaging System 2 prompted students to add 8 objectives

Correcting anchoring errors

Recall the airport runway and double-decker bus experiment described

Correcting anchoring errors

Anchors affect estimates of targets by highlighting features shared by the

Air transportation is a feature of runways, whereas

Ground transportation is a feature of buses

Correcting anchoring errors

Proper framing highlights differences between the features of anchor

Making the length of runway less prominent in the evaluation of the

Correcting anchoring errors

Proper framing also corrects anchoring errors when it makes us consider

People facing multiple anchors evaluate the plausibility of each anchor

Correcting hindsight errors

Prospective hindsight is a System 2 method that corrects hindsight errors

An investor considering concentrating her portfolio in the biotechnology

Correcting over-precision errors

What is the current level of the S&P 500 Index?

What is your 67% confidence interval around your estimate?

Correcting over-precision errors

The general “wisdom-of-crowds,” method, even wisdom-of-crowds-

Correcting self-control errors

Whereas people with insufficient self-control are overly eager to indulge,

Reflect on your behavior and the behavior of others

Can you identify insufficient or excessive self-control in yourself and in

Correcting over-precision errors

Properly calibrated 80% confidence intervals of future S&P 500 Index

Yet 80% confidence intervals by corporate chief financial officers