Behavioral finance FAQ / Glossary (Selective)
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Year/month, d: developed / discussed,
Selective attention/ exposure/ memory/ perception / reporting
Selection bias / Selectivity bias
Not specified, as related
to many phenomena
To pick fruits, information and ideas according to taste
can make neglect better ones.
Why not looking for other flavors and mind vitamins?
Definition and effects
The selectivity bias is a rather common habit of human beings to
select too narrowly the information they use for their
They shun to dig for under-the-surface facts, as well as to look at the broader
The reasons can be diverses, from neglect and laziness to the feeling that to
know the full truth might hurt our beliefs.
Those blinders tend to lead to wrong decisions and
behaviors, in economics and finance as well as
in many other areas of knowledge and activities.
This myopic approach is found under various labels. Thus better show here
the whole range (some with their own glossary articles), so as not
to be too ...selective:
Being overly impressed by facts that are salient,
spectacular, coincidental, available or mediated
As a consequence neglecting to look for contradictory
facts, or fuller information to understand more complex /
gradual evolutions / situations (see range estimate
(aka event selection).
Looking for and accepting only information sources
that confirm and comfort our beliefs.
Focusing (anchoring) on some past events and neglecting
others that are too ancient, less pleasurable, or whatever.
Also, remembering only successes, not failures can lead to
repeat risky / irresponsible behaviors.
Choosing or interpreting information only in a way that
comforts our beliefs or justify our actions.
Similar or related phenomena (see the specific glossary articles)
Getting blinded by an emotion (greed, fear, hope,
empathy, hate...) that overwhelms a full and lucid
analysis of the situation
Generally any mental fixation on a past event, idea,
More specifically to anchor on a number is an
unconscious distortion of an analysis, valuation and
negociation, either by a recently presented number,
even irrelevant with the topic oran ancient reference
point, for ex a buying price.
See certainty. A belief, right or wrong, might hinder further
observation and analysis ...except when they seem likely
to confirm the belief.
Seeing things only in black or white, 100% true or
100% false. One of the Aristotle's biases / creeds.
This neglects their complexity, gradual aspects (degrees,
cursor), dynamic evolution and not clear-cut situations
and prospects (opposites: fuzzy logic, uncertainty).
People are afraid of uncertainty, ambiguity and the
This allergy might give them an intense painful feeling.
=> Thus, to feel comfortable, they might adopt a belief
they take as a certainty even if it is an illusion.
Once a belief is ingrained, people will resist later to adjust
to realities and their evolutions.
Denying mentally the reality of any information / event
that contradicts one's beliefs, knowledge, commitments,
Too many information (or too many legal rules) can drown
the mind and make it unable to sort what is crucial and
what is trite (noise) and also to detect important "weak
A form of cognitive dissonance and selective perception
* accept only information that confirm one's beliefs
* and/or interpret information according to those
Similar to cognitive dissonance.
Similar to anchoring
A language or picture formulation that gives a narrow
presentation or definition of a situation or issue,
* that omits unconsciously or deliberately some aspects
* therefore that limits and deviates its understanding and
the related reasoning / decisions.
Taking aspecific event or element as a general phenomenon.
An habit can make inattentive to the evolutions of the
situation we have to deal with.
A simplified and quasi automatic mental way to detect
and interpret events and situations and to take decisions.
It can be based, to take the most common ones, on:
* previous beliefs and models (representativeness heuristic),
* more or less relevant "rules or thumb",
* immediate perceptions (availability heuristic, primacy
bias) or emotions (affect heuristic)
* obviously superficiality and mental laziness if we don't
check how relevant is the information.
This lazy thinking can qualify many bounded cognitive
processes, such as seeing and reasoning
* on only the most apparent aspects of things
* or according to one's ingrained beliefs / certainties, using
flawed / apparent / binary logic
* or by limiting the conclusions and decision-making to
the most reductive dichotomies, skipping other possible
See framing, narrow thinking, tunnel vision, binary logic,
availability heuristic, fallacy, reductionism...
Following the opinion and behavior of other people instead
of digging deeper to understand issues.
Using a flawed or binary logic, or taking into account only
An overreliance on numbers (statistics, accounts,
probabilities, mathematical models) without wondering
about their assumptions and their realities.
Also a tendancy to prefer a precise prevision number
instead of a range of scenarios
Focusing on the favorable / unfavorable interpretations
Sticking to the first impression or idea.
Similar to (availability) heuristic
Deciding on the basis of only one projected number
(seen as the most probable) instead of a range of scenarios
allowing for alternative plans.
Avoiding to search search more information than the
minimum to save cost and effort.
See also cognitive overload
Mental phenomenon akin to generalization from a single
aspect when building a theory or making a description.
Once we picture, define, categorize, imagine, interpret,
express something in a way, it becomes harder to change
that representation, even if it is wrong and caricatural.
Such a stereotype (see below) can be individual or
It can be real or illusory, relevant or not to the situation.
A representativeness heuristic like generalization and
reductionism that allot things or people to arbitrary
Tendency to stick to the first explanation (primacy bias)
we think, which makes it difficult to find other ones.
It can be linked to various heuristics
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