Behavioral finance FAQ / Glossary (Story)
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,
(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?
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
And/or more convincing to the affect
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
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
knowledge" 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.
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