Behavioral finance FAQ / Glossary (Automatic)
This is a separate page of the A section of the Glossary.
Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
Automaticity, autopilot bias
08/12d + see attention bias,
reaction, status quo bias,
habit, heuristic, reflex
Be careful about uncontrolled behaviors that bypass your mind!
Watch that the robot in us, which does the chores, does
not break too much china!
Automaticity defines actions or reactions that are
performed unintentionally, unconsciously (or
half-consciously), either suddenly or persistently.
usually as the immediate result of:
A reflex (see reflexive) to an external stimulus,
A physical or mental habit (see that word)
Or some inner emotional impulse
This shows that some "instant" behavioral phenomena can not be fully
categorized as cognitive or emotional. This is the case for:* quasi-physical / mechanical automatisms (*)
* and collective / institutional rites.
(*) Something physical (see neurosciences) occurs when a mental
habit takes hold.
Some connections between neurons through neurotransmitters
or electric waves , once they took place often, become like
"wired", quite hard to redirect.
Types of automatic behaviors
Different kinds of strings that move the puppet or keep it alive...
Here are the various kinds of automatic behaviors,
* From the most basic ones - on pure autopilot
when conscious thinking is disconnected -* To those in which cognition or emotion play a small part.
* Not to forget those which are appropriate and those
inappropriate. Let us call the later "reflexive biases".
Now the details:
This is the most basic automaticity, an unconscious /
uncontrolled knee jerk nearly physical reaction to a stimulus
* Either based on a previously known similar situation...
* Or on its Pavlovian version, conditioned to respond to a
* Found also in its superstitious or ritual versions.
Impulsive emotions bringing instant reactions (see affect
Compulsions, as strong damaging reflexes or drives that
cannot be resisted.
Habit (see that word):
unconscious - or slightly conscious - good or bad practice that
has been ingrained for a long time.
Addiction: habit that cannot be resisted, with disastrous
Obsessions as intense recurrent emotions (greed, fear, love,
hate...) or mental quests that like addictions cannot be resisted.
whatever those phenomena are, either innate or acquired via
a long experience in an area of activity.
Many of our decisions, whether conscious or not, and many
of our thoughts, have been influenced by a silent crossing
and assembling of complex data made "in the background"
by our neurons
Intuition and sudden imagination, as subconscious / pragmatic
neural analysis of the situation, can bring highly adaptive
solutions..preferably if some sorting is done before applying
them, as they could rest on anchored beliefs more than on
Heuristic. Here are mental shortcuts / quick recipes that
are used routinely and automatically - but rather consciously - to
There are many kinds of heuristics (described in the related
* Either an immediate perception of a situation (availability
* Or a simplified model that might help to understand
it (representativeness heuristic, generalization...),
* Or simple rules used to handle it (recipe, rite...).
Consequences: useful or harmful?
Practical, fast , efficient, ...except when pure blunder.
That automatic / reflexive / instinctive behavior might be based on
* either experience and prior (unadjusted) preparation,
* or just an immediate improvisation / gut decision.
It might save time and effort in decision making (see that
It can bring fast solutions in case of emergency, and in some situations
foster good discipline (good habits).
In fact, most of our (ordinary)
behaviors are automatic.
That is a luck, if not we would spend all our time pondering what to
do, and even forget how to breathe and wonder what feet to use
to start walking.
Even some conscious decisions might be started by unconscious
reactions to stimuli until reasoning takes control.
Also experience and education are a continuous acquisition
process during the whole life. They give knowledge that becomes
automatically available when needed.
But it can be (or can become) maladapted, suboptimal or fully
Here automaticity becomes a bias:
the "reflexive bias".
Such counterproductive effects are well known in money and
investment matters, in which they can cause
- individual suboptimal decisions
- and general market anomalies.
Automatic responses should normally be avoided in some
Complex, fully uncertain and totally
Also well-known ones in which automatic "bad"
reflexes proved to give unsatisfactory result.
Here, they are more akin to Pavlovian reflexes or superstitions than
to well-thought practices.
Among the specific individual or collective biases that automaticity
can produce, let us cite:
For individuals: status quo bias (people of habits
Or on the contrary, hyperactivity (knee-jerk reaction when
it should be better to wait),
Those phenomena can be seen for example in investing:
hyperactive traders vs. excessively passive investors when
experiencing a loss
For human societies: blind obedience to
* Rules, common conventions, paradigms,
* Dogmas, rites, taboos,
* Herding, trend following
See related articles (status quo bias, hyperactivity, herding, trend following)
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1) click "messages", 2) enter your query in "search archives".
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