Behavioral finance FAQ / Glossary (Superstition)
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,
01/2i - 02/8i + see
hope and fear
Can blind guidelines based on coincidences
make an uncertain world more certain?
Superstition is a belief that:
Some fortuitous events (seeing a black cat) could be interpreted
as 'signs' about what to do or what will happen in completely different
and unrelated areas.
Certain practices to use - or on the contrary to avoid - would
bring good or bad luck.
Underlying cognitive and emotional traps
Superstition, most of the time, is linked to:
Cognitive shortcuts (availability heuristic, representativeness
heuristic, lazy thinking...).
Magical thinking: seeing correlations between events
actually independent of each other, but that happened once
simultaneously, or that seem to have something in common.
The emotional couple usually labeled
"hope and fear".
The urge to find explanations (rationalization,
and here again availability heuristic) about events, because
of an aversion to uncertainty.
People might have the feeling to see such explanations when they notice
Some strange coincidences,
Or some clusters of similar facts.
OK, some of those events can give clues that some hidden process might
be at work that need closer investigation.
But many of those occurrences are not reproductive, far
This does not stop some people to hastily interpret them as "signs".
=> Then superstitions are born.
Superstition and money
Magical money game
Money is a field prone to many superstitions, creeds, magic beliefs
This fetishism influences not only spending, saving, borrowing, donating
decisions, but also, even more typically, investing decisions.
Specifically, people tend to have a superstitious interpretation of
asset market price variations.
They try to find illuminating explanations to those variations
that seem to them mysterious and disturbing (it is true that their causes
are not always clear), and as they feel it painful to live in doubt,
fog and uncertainty (see that word),
When that greed (or fear) to get whatever explanation gets combined
with anchoring, stereotypes and other beliefs, it creates a fertile ground for
esoteric interpretations and magical thinking (see that word).
=> This is "representativeness heuristic" (see that phrase)
pushed a bit too far.
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