The Natural Selection of Prediction Heuristics: Anchoring and Adjustment versus Representativeness

Czaczkes, Benjamin; Ganzach, Yoav

doi:10.1002/(sici)1099-0771(199606)9:2<125::aid-bdm221>3.0.co;2-7

Cited by 77 publications

(17 citation statements)

References 18 publications

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“…However, as recent developments in behavioral decision theory indicate, intuitive predictions are often influenced by various heuristics that operate concurrently Krantz, 1990, 1991;Czaczkes and Ganzach, 1996). The purpose of this paper is to investigate the combined influence of various heuristics on the prediction of earnings by financial analysts.…”

Section: Introductionmentioning

confidence: 93%

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Overreaction and underreaction in analysts' forecasts

Amir¹,

Ganzach²

1998

Journal of Economic Behavior & Organization

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218

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We examine hypotheses derived from behavioral decision theory regarding conditions that lead to overreaction and conditions that lead to underreaction in analysts' earnings forecasts. We argue that three heuristics jointly influence earnings forecasts: leniency, representativeness and anchoring and adjustment. We present a model for the concurrent influence of these heuristics on forecast errors, and examine three predictions of this model: (1) that there is a tendency towards overreaction in forecast changes and underreaction in forecast revisions, (2) that there is overreaction to positive forecast modifications and underreaction to negative forecast modifications, and (3) that these biases increase with the forecast horizon. # 1998 Elsevier Science B.V. All rights reserved.JEL classi®cation: C44; M10; M40

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Section: Introductionmentioning

confidence: 93%

“…We suggest that while representativeness is often the heuristic that governs prediction, when a potent anchor exists, anchoring and adjustment becomes more likely. An experiment conducted by Czaczkes and Ganzach (1996) demonstrates this argument.…”

Section: Theorymentioning

confidence: 99%

Overreaction and underreaction in analysts' forecasts

Amir¹,

Ganzach²

1998

Journal of Economic Behavior & Organization

Self Cite

218

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“…In sum, compatibility and consistency in the representation of learned objects (the predictors and the representation of the outcome) within a class facilitate judgments involving representativeness (Czaczkes & Ganzach, 1996;Slovic, Griffin, & Tversky, 2002). These arguments suggest that entrepreneurs form associative relationships between predictors and outcomes as they observe those relationships more frequently over time.…”

Section: Influence Of Heuristics On the Two Paths Of Entrepreneurial mentioning

confidence: 99%

Architecture of Entrepreneurial Learning: Exploring the Link among Heuristics, Knowledge, and Action

Holcomb

Ireland

Holmes

et al. 2009

Entrepreneurship Theory and Practice

309

292

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We extend existing theories of entrepreneurial learning and highlight the effects of heuristics under two different learning contexts: experiential learning and vicarious learning. Specifically, we argue that heuristics are consequential in explaining variations in learning. In some cases, heuristics can be highly adaptive and beneficial to the accumulation of knowledge. In others, they can distort judgments and bias learning. By considering linkages among heuristics, knowledge, and action, we seek to provide a more complete model of entrepreneurial learning that allows for examination of the influence of judgments on learning and to expose conditions that can benefit or limit effective action in an entrepreneurial setting.

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“…The rich literature on judgmental return forecasting demonstrates that prediction patterns may vary drastically based on subtle properties of the underlying series (Czaczkes and Ganzach, 1996) and respond to a variety of salient statistics (Mussweiler and Schneller, 2003). It is also acknowledged that prediction patterns are heterogeneous and strongly differ between individuals (Dominitz and Manski, 2011).…”

Section: Discussionmentioning

confidence: 99%