Attachment bias. Holding onto an investment for emotional reasons, such as "my grandfather left me this stock."
Cognitive dissonance. The challenge of reconciling two opposing beliefs, which often results in remembering the positive parts of an experience but forgetting the negative.
Confirmation bias. The natural human tendency to accept any information that confirms our preconceived position or opinion and to disregard any information that doesn't support that preconceived notion.
Fear of regret. The tendency to take no action rather than risk making the wrong one, which often causes an investor to hold onto a stock that's losing value, because if they sold and it rebounded they'd feel even worse..
Inappropriate extrapolation. The tendency to look at recent events (or market performance) and assume that those events or conditions will continue indefinitely.
Mental accounting. This entails looking at sums of money differently, depending on their source or the intended use.
Outcome bias. The tendency to make a decision based on the desired outcome rather than on the probability of that outcome.
Overconfidence. This is the tendency to place too much emphasis on one's own abilities. It often works hand in hand with confirmation.
Self-affirmation bias. The belief that when something goes right, it's because you were smart and made the right decision. If it doesn't work out, it's due to someone else's fault or simply bad luck.
Status quo bias. The tendency of investors to do nothing when action is actually called for.
Sentiment: Strong Sell
Great list. I would enjoy reading this every day as a reminder, and also to rub my own nose in many of my personal failures with regards to this list.
First conclusion bias,
(..........Bias) Can't remember the proper name, but it Charlie Munger talks about it in PCA, about the need people have to be consistant with themselves regardless of new information.
A few of Yabs personal favorites.
Bonk, If you are ever in Rochester MN, let me buy you a beer. We have a bar called "Brothers" in town and I think we'd have a good chat.
Sentiment: Strong Sell
I would venture to say that quite a few SHU posters suffer from "Confirmation" bias.
No negativity is allowed on SHU and IF one dares to post anything remotely critical or questioning, the 12 Apologists come out in force. They have one God and, facts be damned, they support their God.
Look at the criticism Value Sleuth received over there.
BTW, where are you, VS?
I miss your posts.
I'm here, enjoying the company of especially you, eric, and bonk -- and the perspective each of you brings to the subject at hand. Occasionally, I've been posting, usually on threads that find at least one of you involved. The four of us are quite a group -- running the gamut from "Strong Buy" to "Strong Sell", but in my opinion having a firm grasp on the reality of IOC from our individual views.
I read SHU, mainly for what I consider a clipping service of articles from outside sources and petrengr1's posts on technical drilling matters and his lucid statements on interpretations of data and the dots he connects. Don't have much interest in all the opinions, because the generalized group think has a bad track record of adding value.
I've also been posting on IV (InvestorVillage).
BTW, I can hardly wait for the outbreak of "Self-affirmation bias" if/when a new PA is executed and/or various deals are inked on SD, SM, operator, new off-takes, etc. The cult-meter will go "tilt", even though the batting average on accurate predictions will be about .013.
Sentiment: Strong Buy
I must say Bonk that, while I post infrequently, I do read this and other MB's from time to time. I have read some of your posts in an attempt to to understand both sides of the argument. I actually thought in a recent post you did a good job of articulating the obvious and long understood risks of investing in Interoil. Quite clearly, an educated investor understands there is country risk with PNG, management risk with IOC, and deal risk with the various interested parties. If none of these risks existed, Interoil would be trading at a higher level than where it is trading today.
This and some of your recent posts appear to be picking on the little guy type lectures or attempts to scare the less informed. It certainly doesn't represent why I have read your posts in the past. But to each their own and you are certainly free to post whatever you choose.
I will add this, however: each of the 10 behavioral mistakes you have posted can be easily attributed to you as well. If you truly believe that past behavior will be predictive of near future results, I think you are going to be very surprised in about 6 weeks. And if you doubt me, I strongly suggest you reach out to those actually involved in the process outside of Interoil. You won't get inside information but you will get a real pulse on the process that has been underway and shall soon conclude.
Good luck and I'll talk to you next month.
Thanks Plato. Of course I am guilty of tweaking the nose of some of the nutbars that attack me relentlessly - it's both childish and fun. As to the behavioral mistakes applying to me I am not immune of course - I just try to be aware. There's a reason I own call options in IOC - they are a hedge for my short position - avoiding the mistake of "overconfidence".
Sentiment: Strong Sell