Adam Wible just finished Uncertainty Data and Judgement Intro Articles

We've now covered some fundamental concepts of behavioural finance (and more generally, blind spots in human intuition).  Probability is a big one.  Given the complexity of the formulas it isn't surprising that we aren't doing factorials to exponents in our heads, but it is surprising that we still have a high degree of confidence in our gut reactions, despite several real time classroom examples to the contrary.  Some biases I found interesting:

• Anchoring
• Overconfidence
• Exaggerating importance of recent information
• Misplaced priorities and counterproductive regret
• Change in risk appetite when losing vs. winning (throw good money after bad)
• Endowment effect (place higher value on things you already own) and bias for status quo
• Look for evidence to confirm one's own preferences
• People measure success relative to peers rather than on an absolute scale
• Tendency to get probability wrong when expressed in % vs absolute numbers
• Projections, mutual funds, etc are not able to consistently generate outsize returns

Economist: Getting the Goat (Feb 1999) - birthday puzzle, Monty Hall, and false-positive puzzle
Economist: Freud, finance, and folly (Jan 2004)
Economist: To Have and to Hold (Oct 2003)
HBR: Hidden Traps of Decision Making (Jan 2006)
FT: Forget the gurus - toss a coin (Jan 1998)

- Adam Wible