A set of rules to develop a behavioral edge – Part 4
Herding. All stock market prices are both the cause and result of herding behavior amongst investors.
herd
The search for a better guide to stock values
Can we improve on the accuracy of these estimates by obtaining estimates from, say, 22 leading investment banks and averaging them?
Scatter shot estimates of fair value
A group with a high anchor were prepared to pay three times as much for the same wine as a group with a low anchor
Thinking for ourselves
Heuristic – This alternative to careful reasoning may cause us to answer the question of what is the fair value of a stock by asking the question, what is the ‘market value’?
The joy of contrarian investing
The moral courage to act ‘in opposition to the crowd’ when your judgement tells you are right
Does Wisdom of Crowds apply to earnings estimates, price targets, value estimates and stock prices?
The behavioral tail can wag the statistical dog
Explainer – herd mentality and poor investment results
People are rationally (?) choosing not to, as they see it, waste their time and effort in exercising their judgment about the market
Keeping your head in times of turmoil
Doing what everybody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all
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