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.
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References in periodicals archive ?
(400) Optimism bias could be due to a desire to feel happy or maintain/enhance self-esteem, the "need to reduce anxiety associated with uncertain outcomes," the effects of egocentrism, or focalism. (401) However, these aspects have garnered less support than the role of controllability.
There are two cognitive mechanisms for optimism bias: egocentrism and focalism (Chambers, Windschitl, & Suls, 2003).
at 911 n.126; see, e.g., Justin Kruger & Jeremy Burrus, Egocentrism and Focalism in Unrealistic Optimism (and Pessimism), 40 J.
Kruglanski and Fishman (2006: 204) draw attention to the phenomenon of "focalism," whereby "increasing the subjective focus on a given objective leads to the suppression of alternative objectives." Once inside the group, the recruit may focus on the ends "assumed to be served by terrorism (e.g., a defense of one's religion ...)" and may lose sight of "incompatible ends," such as the preservation of innocent lives.
The team noted that a plausible explanation is "focalism." People focus on the (negative) features of the decision that was made rather than the even worse attributes of the alternative.
The influence of egocentrism and focalism on people's optimism in competitions: When what affects us equally affects me more.
Thus, low-materialists might be particularly sensitive to the focalism reduction task while high-materialists might be more rigid and unable to adjust their affective forecast when given a more accurate picture of the future.
The focalism explanation for affective forecasting (Wilson et al., 2000) is that a single-minded focus on the future event causes people to perseverate on their future emotions.
A statistically significant effect was also found for materialism, F (1, 388) = 5.72, p < .05, but this was subsumed by an interaction between focalism condition and materialism level, F (1, 388) = 6.64, p = .01.
However, the Focalism Condition x Materialism interaction that appeared in the affective forecasts failed to emerge, F (1, 388) = 0.446, p = .505.
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).