Behavioral finance FAQ / Glossary (Debiasing)

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This is a separate page of the D section of the Glossary

 

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

Debiasing

01/08i,10i,12i - 03/5i
+ see rebiasing, tilting, image

Straightening the skews

and tightening the screws.

Definition

Debiasing is finding and eliminating     some of
our mental biases
that affect decision making and behavior.

Yes, the blunder-making bugs.

See the glossary articles about "bias" to identify the usual mental and
behavioral ones to be ...debugged.

A kind of analysis and correction process as a "personal hygiene" for deciders.

Debiasing in finance

Loose money screws.
Find them and fix them

Debiasing helps investors, borrowers, traders
to improve their rationality and efficiency.

The process is:

To identify the two levels (collective and personal) of mental /
    behavioral flaws, as mentioned below.

You guessed it: the information in this site can help do the job!

To do one's best to avoid or to correct those biases (although not too
    easy to change habits!)

Logically, to make it followed by some "rebiasing" (see that word) in
   order to adapt
our decisions to the biases that affect the bulk of other
   investors:

Identifying

The two level of biases

Doing our

Debiasing / Rebiasing 

1) Personal level

Observing our own cognitive
or emotional biases
(see
bias) that distort our own
decision making process.

 

 

 

Avoiding correcting or
compensating our biases
.

Admitting also the  inability
to avoid all of them fully and
permanently.

Perfection does not exist
in this world.

2) General level.

Spotting collective
investors biases

(herding...) that bring
anomalies
in market
price levels, returns
or trends.

 

 

Taking advantage of
market anomalies.

It might be profitable to
mimic consciously some
investor biases
(see some
methods in the "tilting"
glossary article).


Our valuation method based on the stock image coefficient (see "image")
is an attempt at debiasing / rebiasing the stock prices that the stock market
generates.

(*) To find those messages: reach that BF group and, once there,
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This page last update: 09/08/15        

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