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« Fun with CNBC | Main | Energy Opportunity »

August 10, 2006


Barry Ritholtz

Speaking of cognitive bias:

The first factor I mentioned was the shift in Fed policy as a possible source of the changing market reaction:

"In October 1982, the Fed shifted its emphasis from money-supply measures and "nonborrowed reserves" to an explicit funds rate-targeting procedure. That is one possible explanation for the change in results after Fed tightening ends. (See: When Did the FOMC Begin Targeting the Federal Funds Rate?)"

But the reason we go back to the historical comparison is Mark Twain's quote: "History doesnt repeat, but it rhymes" --

Im trying to see if there are any rhymes . . .


Barry -- always honored to have your comments. I probably did not explain this very well, but the idea is to get away from a potential cause where people already have an opinion to get them to be more open-minded when they look back at the initial question. You try to avoid cognitive bias. It is a pretty standard teaching method. I could have used baseball statistics or something, and almost did. I might do so in the book version of this, if the Iraq conflict has already been settled.

For what it is worth, I respectfully disagree with your assertion about wars and the market. When you get around to checking the data -- and we are all confident that you will :) -- I think you will change your mind.

Barry Ritholtz

There is a causation and correlation issue with Fed activity -- interest rates and their impact are clearly relevant to the economy and corporate profits --

where as military actions are far more removed . . .

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