Economics Dictionary of ArgumentsHome
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| Optimism bias: Optimism bias refers to the tendency of individuals to underestimate the likelihood of negative events and overestimate positive outcomes for themselves. It leads people to believe they are less likely to experience adverse events compared to others, influencing decision-making and risk assessment with an overly positive perspective. See also Decision-making processes, Decisions, Decision theory, Behavior, Behavioral economics._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Behavioral Economics on Optimism Bias - Dictionary of Arguments
Henderson I 95 Over-optimism/optimism bias/behavioral economics/ Henderson/Globerman: Behavioural economists have noted that individual investors tend to make consistent mistakes in choosing stocks. In particular, they tend to believe that they are better than average investors or they entrust their money to investment managers who they believe are better than average investors. Problem: But theory and evidence document that the overwhelming majority of investors, including professional investors, can earn higher returns only by accepting greater risks. Hence, spending time and money trying to be a better than the average investor makes active investing a Iosing proposition. Solution: (…) an alternative method of investing emerged and has, over time, become the dominant way that individuals invest in stocks: index funds. Index funds: Index funds are Iow-cost investment vehicles that hold large and diversified portfolios of stocks. Managers of index funds don't attempt to "outperform" other investors by trying to pick winners and avoid losers. Instead, they try to duplicate the average return of a large portfolio of stocks, while minimizing the transactions costs associated with ongoing management of the portfolio. >Stock market, >Transaction cost, >Shareholders, >Behavioral economics._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Behavioral Economics Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
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