Social Projection – Selling Scared

Watching a horror movies frightens us into selling stocks. Research at my alma mater has shown that Social Projection makes us subconsciously project our feelings on others. Plus, it makes us act on it. So if we are scared after a movie, we think others will be scared, too. And

Author: Dominik | Published: 08.05.2012

Kategorien: Behavioral Economics

Where is Behavioral Economics going?

Behavioral Economics has been around for about 40 years. Most of the time has been spend discovering psychological phenomena. We were found not to be as rational as economist had believed. Studies have been conducted to identify the weirdest of behaviors. Just as studies have been conducted to

Author: Dominik | Published: 06.05.2012

Kategorien: Behavioral Economics

Hindsight Bias

How many people have predicted the recent financial collapse that resulted in the Great Recession? Everywhere you look you find economists, journalists, investors and ordinary people claiming they did. There are very few who actually did, and those people got incredibly rich by doing so. Look at Michael Burry,

Author: Dominik | Published: 30.04.2012

Kategorien: Behavioral Economics

Debt Entitlement

Everyone is talking about the debt crisis. Governments are deep down in the dumps, and so are many consumers. Why is that? There is a number of reasons we carry debt, let’s single one out today: Entitlement. We have come to expect a lot from life. Our parents pampered

Author: Dominik | Published: 29.04.2012

Kategorien: Behavioral Economics

„Foreign Rationality“ – Language Based Rationality

Researchers at University of Chicago found that we make more rational decisions when pondering on them in a foreign language. In the particular experiment the framing effect disappeared. Thus loss aversion was reduced and a more risk neutral behavior exhibited. It was concluded that even though we might

Author: Dominik | Published: 28.04.2012

Kategorien: Behavioral Economics

Mental Accounting 101

Imagine a couple having saved $150,000 towards their dream vacation property. They earn 4% on their investment. Also they have just bought a new car for $40,000 and they financed that at 10%. As a matter of fact, the couple is wasting a lot of money by not just

Author: Dominik | Published: 25.04.2012

Kategorien: Behavioral Economics

Escalating Commitment into Failure

Ever got into an argument that turned into a ferocious fight? And nobody knew how it started or why you both were so adamant about your points of view? Well, you fell victim of escalating commitment. This psychological phenomenon makes us biased for whatever we have just said

Author: Dominik | Published: 22.04.2012

Kategorien: Behavioral Economics

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