Behavioral finance FAQ / Glossary (Goal)

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

Goal, intention, objective


See preference, decision, intention,
willpower, commitment, overreliance
on management objectives / norms

Planning for the war.

From intentions to goals

We build goals normally by taking into account two sets of criteria:

* our preferences (see that word)

* our anticipation of future situations.

Contrarily to what behaviorism states reductively, at least in its primitive
form:

People do not only react to external stimuli.
Self generated intentions
drive them also.

When those intentions are clearly organized in the mind,

with a personal commitment to reach them, they become precise goals.

    => Simple intentions without clear commitments are only mild forms
          of goals.

Goals, decisions, actions

Goals as a driving map
People as agenda bearers

Even vague intentions tend to influence behaviors.

But preset goals:

* have much more incidence on decision making.
* help to organize actions.

* are mental factors / neuron conditioners that orientate our reactions to
   everyday events.


To be reached, goals have to be detailed with precision into

 

* Actions plans

* and targets / objectives (*)
* to which the person commits itself.

(*) MBO - management by objectives is a buzz phrase used in
many organizations.
It is a necessary tool to make things happen, except if it becomes a numeracy
bias and /or a bureaucratic
pretence in the hand of control jerk..
See "overreliance" (on management objectives and goals).


In investment, price objectives have also become keywords. They
help to decide but might be illusive (see anchoring)

In practice, in their execution / operational phase, the goals can sometimes
get bypassed  by

* well-thought / rational adjustments. Congratulations for the wisdom!

* but also unadapted immediate reactions or cognitive or emotional biases.-

Constraints and incidences

Can any goal go? Where does it leads to?


Goals need willpower (see that word) to get reached.

As for their incidence, goals might be - sorry, this is a bit binary -

good or bad, rational or irrational.

Some goals can become destructive fixations / addictions / commitments
that override permanently and inflexibly (mental rigidity) all other considerations.


Some people get obsessed with their agenda, they put the goals above
everything as if "the end justifies the means".

Another thing is that illusions might be behind some not well thought goals.
They transform good intentions (Hell, the proverb says, is paved with them)
into disasters.

Also people might determine their goal according to what they believe to be
their interest
but which might be against their real one.

An example:
    investment
goals and intentions


Investors normally look for an optimal balance between risks and benefits.

Of course the objectives (and the way to reach them) might be illusive,
destructive or distorted by many behavioral biases.

Another thing is that benefits are mentioned
here in the broad sense.

They are usually monetary gains
but not always or only.

Outside their direct financial interest, people might have other - quite
rational also
- personal ntentions or goals .

The objective might be for example

* to try to understand economics (and psycho sociological) matters
   from the inside,

* to learn about ones own ability, and improve them

* to support financially a precise activity or business,

* to impress friends, colleagues or neighbors,

* or whatever.

(*) 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: 05/09/15  

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