Anchoring

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Anchoring

The act of basing an investment decision on irrelevant information. For example, if one bases the value of a stock on its price a year ago, one is practicing anchoring. This can be a dangerous practice, but it is also easy to do. Anchoring is a concept in behavioral economics, which states that people often make decisions based on their perceptions and feelings in addition to (and sometimes instead of) facts.
References in periodicals archive ?
Anchoring or focalism, a form of cognitive bias describes the common human tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions (Tversky & Kahneman, 1974).