Behavioral finance FAQ / Glossary (T-U)

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Ta - Ti


Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental

(statistical) Tail risk

94/11i + see fat tail, long tail,
extremes, rare events

TA / Technical analysis



Because of its length, this article
       is in a separate page

 of the "T-U" glossary section

Testosterone

04/08 + See gender,
neuroscience

Throwing the sponge

See capitulation

Tilt, Tilting

01/10i -05/8i + see
rebiasing, image

Adding an ounce or irrationality
to a pound of rationality
to tilt the scales.

To tilt an asset valuation is to apply techniques that:

In a first step, use "rational" asset valuation data and
  
methods (see fundamental analysis),

In a second step, "tinker" with them to adapt them to 
  
market realities ...and biases ("market-based valuation").

Also, for stock-picking adepts, reinforce some parameters
   of risk or price screening.

Those adaptations / alterations of valuation parameters may range from
Sheffrin's "tilted beta" to my own "image coefficient".

Time arbitrage, value

(Investment) Time horizon, preference, span

Because of their lengths,
       those articles
are in a
       separate page

 of the "T-U" glossary section

Tipping / Transition /
Triggering point

See percolation threshold,
regime switching

Tra


Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental

Trading pattern, style

See styles of investing, (investor)
profiling / type + profile site link

Transitive preferences / reasoning, transitivity

01/7d + see preference

Please, A, B and C, stay in line!

Definition: transitive reasoning is a key logical precept in which:

If statement A
    entails statement B,

And

If statement B
    entails statement C
,

Then statement A

entails statement C.

+   = 

=> Thus, if A doesn't entail C, there is no transitivity,

we have a "transitivity bias" in the reasoning.

Transitivity biases in human preferences
     and decision making

Can the scale of preferences become messy?


Human beings base normally their decisions on a scale / transitive order / 
hierarchy of preferences (see that word).

This is supposed to be the case for example in economic / financial preferences
and decisions.

But, in reality, lacks of transitivity tend to occur in
human reasoning when the decider's preferences
(A, B, C, D...) intermingle. Alphabet soup?

Those defects in the transitivity fabric happen for example

When situations are specific and foggy
The decider faces complex, uncertain and/or not clear-cut 

situations, with a wide range of choices and an information overload.

This makes formal logic hard to apply, or even sometimes not
too relevant (see fuzzy logic...)

He lacks information - or other adequate means - to rank and

satisfy those preferences.


When personal (and social) aspects interfere

He is prone to logical fallacies and other cognitive biases,

He is also subject to emotional biases,

Not to mention some ingrained habits, automatic reflexes and even
    addictions,

He is under social influences (mimicry, peer pressure...).

Of course he could also change his preferences in some
   
situations or even from day to day, as he is not a robot.

Transmission / dissemination, diffusion (of information)


Due to its length, this article
       is in a separate page

of the "D" glossary

Transparency premium

01/1i,2i + see information

See through corporate dress.

Transparency is an important factor for sound economy, sound finance
and sound markets.

The lack of transparency was one of the causes of the subprime bubble
and crisis

In the case of stock markets, "transparent" companies
are those that give abundant, frequent, relevant
and reliable information.

As they are usually considered trustworthy (see trust), their stocks are
usually quoted at a premium in the stock market.


The lack of transparency might be caused by:

* not only a bad communication (or lack of communication, intentional
   or not)

* but also the fact that the company has many unrelated activities or
   very
complex operations which are not too easy for investors to 

understand.

Well, diversification might be needed to avoid to get stuck to
obsolete activites, but it
should be explained

Tre - Tz


Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental

Trend (as fashion, fad or momentum)

Trend following / persistence


Due to their lengths, those article
       are in a separate page

of the "T-U" glossary section

Triggering / Tipping point

See percolation threshold

Trophy seeking


09/2i + see economic man,
endowment effect, status
seeking, winner's curse

Trust



Due to its length, this article
       is in a separate page

of the "T-U" glossary section

Tunnel vision



04/11i, 05/10i + see framing,
attention, anchoring, availability
heuristic, cognitive trap, certainty
+ bfdef2

If we don't see where the tunnel branches out
we are going to miss other landscapes.

Tunnel vision, is an allegory about the tendency to look in only one direction
without seeing what happens at the periphery.

It has some relations with anchoring, heuristic, framing , habit (see
those phrases).

Practically, in a given situation, tunnel vision is a momentary or
permanent inability to imagine other explanations / solutions

The one that comes immediately to the mind (availability heuristic),
       or that seems the most obvious (lazy thinking) or became ingrained
      (as an habit) blocks the quest for other ones.

Examples of such an "instinctive certainty" / "myopic certainty" abound:

When everybody tries to use the same exit door at the theater or store,
    imagining, often wrongly, that

"If nobody tries another door it is because it must be closed".

Or when calling the repairman because the TV doesn't work,

without looking if the wire to the roof antenna is plugged on

Type / Prototype

See profile, profiling,
style, stereotype, fuzzy

Stocks, as well as investors, can be (with some precaution to avoid
...stereotypes, as category borders are always fuzzy)
sorted by types
(styles, categories) of behaviors.

Unc


Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental

Uncertainty (vs. risk)

Uncertainty aversion / avoidance / premium

Due to their lengths, those article
       are in a separate page

of the "T-U" glossary section

Unconscious behavior, decision,

08/12d + see automaticity

Under

Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental

Underadjustment

See delaying tactics, adjustment,
underreaction, certainty effect.

Definition:

Under-adjustment is a mental limitation in which somebody
adapts too slowly its opinions and behavior to new situations.

This is something similar to underreaction.

Underconfidence, underconfident



Due to its length, this article
       is in a separate page

of the "T-U" glossary section

Underpricing / overpricing

See price anomaly, mispricing + bfdef2

Undertrading


See status quo bias, delaying tactics
(and the contrary: overreaction,
overtrading)

Underreaction / overreaction



Due to its length, this article
       is in a separate page

of the "T-U" glossary section

Unf - Ut


Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental

Unfair

08/6i + see fairness.

Unintended consequence

Due to its length, this article
       is in a separate page

of the "T-U" section of the Glossary 

Utility (in economics and finance)

(expected) Utility

Utility maximization

Due to their lengths, those article
       are in a separate page

of the "T-U" section of the Glossary

(*) To find those messages: reach that BF group and, once there,
      1) click "messages", 2) enter your query in "search archives".

Members of the BF Group, please
 vote on the glossary quality at BF polls

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This page last update: 23/08/15
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