March 2009
8 posts
Is South Florida Real Estate Bottoming?
Every Winter, we come down here to South Florida to gather in and around my parents house in Del Ray with my siblings and their families who are scattered around the country.
Since arriving Thursday afternoon, I’ve sniffed about a bit and even made a few calls inquiring about residential properties specifically in Boca and Miami. Here is my initial impression…
The market is upside...
The Complementarity of Behavioral Economics and...
Most simply formulated, it is a paradox - the paradox of behavior which is at one and the same time self-perpetuating and self-defeating! …Common sense holds that a normal, sensible man, or even a beast to the limits of his intelligence, will weigh and balance the consequences of his acts: if the net effect is favorable, the action producing it will be perpetuated; and if the net effect is...
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StockTwits and the Death of the Delphic Oracle
“Croesesus crossing the Halys will destroy a great empire” - Delphic Oracle, quoted in Niederhoffer’s Education of a Speculator
The beauty of the above quote is that it sounds great but never really specifies which empire will fall. *** While Victor Niederhoffer might ultimately be remembered for blowing up spectacularly on multiple occasions, he wrote a great book back in the...
Sunday Morning Mood Induction
When we were in grad school, my wife (then girlfriend) was involved in research where they would use music to induce mood states including sadness and elation over short periods of time. Then, once they had induced mood, they would ask a bunch of questions about cognitions or whatever.
We used to laugh about it because, while the specific pieces of music had been empirically vetted in previous...
"Selling too Soon" Disposition Effect Evident Here
Over on StockTwits this morning I am observing a bunch of comments from traders saying that they “sold this rally too soon.” This is a significant collective expression.
There are two important psychological processes occurring here which I will briefly outline for the sake of awareness raising among traders. These are loss aversion and regret.
1. Loss aversion: The two behavioral...
Brief Comments on Market Sentiment (Much More...
(This was originally published on Real Money on 03/06/09 @ 11:32PM EST)
I am reading with interest the comments here on the Real Money Columnist Conversation regarding the psychology of the market now. I think that the tension here is a reflection of the tension among market participants in general.
Traders have been in an increasingly volatile (and stressful) environment since at least February...
Normative, Descriptive and Prescriptive Economic...
Before I get into the heart of a comprehensive model of market participant behavior, I would like to put the concept of prescription into context amid economic theory. Traditional economists offer normative theories. That is, they model how markets ought to behave in a world where all the participants are rational actors and always behave in accordance with expected utility theory. One need...
On a Prescriptive Model of Market Participant...
In a recent article in the Seattle Times, Teri Cettina interviewed Dan Ariely about his new book entitled Predictably Irrational. Airely is a behavioral economist at MIT and Duke who has done wonderful research which helps to describe the ways in which people behave irrationally especially where money is involved. I love this type of research but at the same time have a big problem with...