Behavioral finance FAQ / Glossary (Story)

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


Dates of related message(s) in the
Behavioral-Finance group (*):

Year/month, d: developed / discussed,
i: incidental

(good) Story, Storytelling

03/10i - 07/7i + see affect,
belief, manipulation, attribution,
rationalization, framing, curse
of knowledge, availability

If is so interesting, it must be true, no?

The purpose

Compared to hard and naked facts, a good story, with a good
yarn, good metaphors, enough romance or terror, sophisticated concepts,
with maybe also a bit of humor and good drawings and pictures, is often:

Easier to understand or to remember
   (cognition aspect),

And/or more convincing to the affect
   (emotional aspect)

Ok, but this not always what happens

Good stories, in the sense of pure mental inventions tend to be used to
explain the unexplainable, or to create dubious rationalizations, if not pure

They are also often found any time an unexpected event takes place.

People like to "jump to conclusions" with explanations that are superficial,
even lazy
, associating the event with whatever other elements immediately
cross their mind: see availibility heuristic

This is close also to stereotypes (representativeness heuristic), framing or
affect heuristic (see those words), with the benefits and the risks / damages
they entail.

Storytelling might be useful

A vivid story can be helpful to explain and understand
abstract concepts or complex and fuzzy realities.

Such a "parable" can be an attempt to break the "curse of
such as :
= the inabilitiy by experts to explain their knowledge clearly and simply, by
   accepting to sacrifice its intricacies).

=> Even some scientific findings are named as allegories

("bell curve", "fat tails", "strange attractors", "big bang"...).

It might also mislead:

When it oversimplifies things (see stereotype),

Or worse, when it creates wrong certainties 

This is done by  presenting things :    

     Either falsely (see framing),

     Or without real bases (or with too shallow ones) to support them,

     Or in a more emotional than rational way (see affect heuristic) that 

   causes a subjective mental attraction or repulsion.

 The "story teller" can do this misrepresentation

      Either in (more or less) good faith

      Or (more or less) deliberately, as a spin or trap
        (see deception, manipulation).

Examples ...with money involved

In stock markets, the dotcom craze / bubble of the end of the 20th
   century gave good examples of misleading stories that were sold
   to gullible investors

Someting similar happened with the subprime loans securitization which

were presented as a brilliant feat of financial engineering.

It is also seen in the art market.

Artists and art pieces who had a mysterious "interesting" life, get more
spin and might become better rated than those who have a commonplace
story, independently of their artistic qualities.

(*) 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
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This page last update: 11/09/15  

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