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« Maintaining Objectivity | Main | Disciplined and Regular Portfolio Review: A Best Practice »

March 20, 2007

Comments

oldprof

Hi Bernardo,

Thanks for your comment and the book pointer, that I'll add to my reading list.

The pervasive nature of this is why it is so important. If more investors realized what was happening, they could improve their performance.

Best,

Jeff

Bernard Guerrero

Common enough flaw. In my own line of work, I'm regularly bombarded by folks from other parts of the firm who think they've spotted some key to credit defaults. Even quite experienced underwriters fall prey to it. The problem, of course, is that they've never looked at a control group or formally back-tested "factor X", which often enough is just as or more prevalent in the non-defaulted population.

More generally, Philip Tetlock covers a lot of these sorts of bias in "Expert Political Judgment". Don't let the title fool you; his immediate subject matter is punditry on foreign affairs and macro-econ, but I think the basic lessons are widely applicable.

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