May 30, 2013

Recency bias and reversion to the mean are very important terms to understand when it comes to investing. What do they mean and why should you care?

2 thoughts on “May 30, 2013”

  1. Katherine Graham says:

    Recency bias is where you focus on what just happened, whereas reversion to the mean is where you understand historical averages. Reversion to the mean tells us that the speculation that has driven up the price of a hot investment will bring the price back down to its historical mean some time in the future. It is important to understand recency bias and reversion to the mean, because otherwise you might get caught in a bubble. Therefore, you will waste a lot of money. As far as I know, people who invest money want to make money; not waste it. If they don’t understand recency bias or reversion to the mean, they are likely to accomplish the exact opposite of their goal.

  2. Mike Finley says:

    That was an outstanding answer, Katherine! Let’s recap. Investors place way too much importance on what just happened (recency bias) and way too little importance on the historical averages of any particular asset (reversion to the mean). When investing, think long term and that usually means ignoring what just happened over the last month, year or decade. Just as Katherine stated, your pocketbook will be effected dramatically by understanding these two concepts.

  3. Pingback: check this out
  4. Pingback: visit the website
  5. Pingback: porn
  6. Pingback: bad credit loan
  7. Pingback: moezel duitsland
  8. Pingback:
  9. Pingback: bad credit loan
  10. Pingback: buy ambien online
  11. Pingback: Taxis IN Aylesbury
  12. Pingback: Beate
  13. Pingback: rifle cases
  14. Pingback: Lesben Fick
  15. Pingback: aylesbuyr taxi
  16. Pingback: asia girls
  17. Pingback: astrologie 2014

Leave a Reply

Your email address will not be published. Required fields are marked *

The Crazy Man in the Pink Wig