Week 4

Question 1

clustering illusio

Answer 1

people tend to see clustering

-people expect a random distribution to be an even distribution

Question 2

Birthday Paradox

Answer 2

thinking in a small group, that no one will share a birthday
-in any group of 23 people, the likelihood that two of them share a birthday is greater than 50%

Question 3

the hot hand fallacy

Answer 3

is the psychological condition that people believe an individual is hot or cold depending on past performance

• after consecutive positive outcomes, another positive outcome is more likely
• example basketball

Question 4

anchoring

Answer 4

is a heuristic revealed by behavioral finance that describes the subconscious use of irrelevant information, such as the purchase price of a security, a fixed reference point (or anchor) for making subsequent decisions about that security