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representativeness heuristic
Also known as: representativeness bias, representativeness heuristics
Facts (10)
Sources
Biases in Behavioral Finance - World Scholars Review worldscholarsreview.org Sep 15, 2024 5 facts
referenceSoraya, R., Risman, A., & Siswanti, I. (2023) published 'The Role of Risk Tolerance in Mediating the Effect of Overconfidence Bias, Representativeness Bias and Herding on Investment Decisions' in the Journal of Economics, Finance and Management Studies, 6(7).
claimSoraya et al. (2023) found that representativeness bias and herding have a significant impact on investors' decision-making processes when analyzed through the lens of risk tolerance.
claimRepresentativeness bias occurs based on preconceived notions of personal characteristics and attributes related to people's appearances, attire, or personal habits.
referenceJamshidi, Ghalibaf Aslf Asl, and Fadaie Nejad (2019) published 'Studying the Overconfidence and Representativeness Biases of Individual Investors in Tehran Stock Exchange' in the Financial Research Journal, which investigates these specific biases among investors in the Tehran Stock Exchange.
claimKhan (2020) suggested that experts and investors in the Pakistan Stock Market may succumb to representativeness bias due to the overwhelming nature of recent information and the misinterpretation of chance.
Mind Over Money: Behavioral Economics and Financial Decision ... linkedin.com Dec 9, 2024 2 facts
claimHeuristics are mental shortcuts that simplify decision-making but can lead to errors in judgment, with common examples including the availability heuristic and the representativeness heuristic.
claimThe representativeness heuristic involves judging the probability of an event based on how closely it resembles a typical case, such as investors assuming a tech startup will be successful because it resembles other successful companies while ignoring relevant financial data.
The Impact of Cognitive Biases on Professionals' Decision-Making frontiersin.org 2 facts
accountThe head of the American retail organization Montgomery Ward failed to expand the company to compete with Sears because he relied on the representativeness heuristic, incorrectly believing a post-World War II depression would occur similar to the post-World War I era, which resulted in a permanent loss of market share to Sears.
referenceKahneman and Frederick (2002) proposed that attribute substitution is a primary mechanism underlying intuitive judgment and representativeness heuristics.
Virtue Epistemology - Stanford Encyclopedia of Philosophy plato.stanford.edu Jul 9, 1999 1 fact
claimMark Alfano identified the availability heuristic, the representativeness heuristic, and the recognition heuristic as unreliable inferential dispositions based on a robust series of empirical findings.