Confirmation bias, as the term is typically used in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a h...

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Confirmation Bias: A Ubiquitous Phenomenon in Many Guises:

In 1974 an article appeared in Science magazine with the dry-sounding title “Judgment Under Uncertainty: Heuristics and Biases” by a pair of psychologists who were not well known outside their discipline of decision theory. In it Amos Tversky and Daniel Kahneman introduced the world to Prospect Theory, which mapped out how humans actually behave when faced with decisions about gains and losses, in contrast to how economists assumed that people behave. Prospect Theory turned Economics on its head by demonstrating through a series of ingenious experiments that people are much more concerned with losses than they are with gains, and that framing a choice from one perspective or the other will result in decisions that are exactly the opposite of each other, even if the outcomes are monetarily the same. Prospect Theory led cognitive psychology in a new direction that began to uncover other human biases in thinking that are probably not learned but are part of our brain’s wiring.

Thinking fast and slow.

Theoretical models of financial markets built on the assumption that some investors are overconfident yield one central prediction: overconfident investors will trade too much. We test this prediction by partitioning investors on the basis of a variable that provides a natural proxy for overconfidence--gender. Psychological research has established that men are more prone to overconfidence than women. Thus, models of investor overconfidence predict that men will trade more and perform worse than women. Using account data for over 35,000 households from a large discount brokerage firm, we analyze the common stock investments of men and women from February 1991 through January 1997. Consistent with the predictions of the overconfidence models, we document that men trade 45 percent more than women and earn annual risk-adjusted net returns that are 1.4 percent less than those earned by women. These differences are more pronounced between single men and single women; single men trade 67 percent more than single women and earn annual risk-adjusted net returns that are 2.3 percent less than those earned by single women.

https://papers.ssrn.com/sol3/Delivery.cfm/98110615.pdf?abstractid=139415&rulid=175370&mirid=3

Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment

Theoretical models predict that overconedent investors trade excessively We test this prediction by partitioning investors on gender Psychological research demonstrates that, in areas such as enance, men are more overconedent than women Thus, theory predicts that men will trade more excessively than women Using account data for over 35,000 households from a large discount brokerage, we analyze the common stock investments of men and women from February 1991 through January 1997 We document that men trade 45 percent more than women Trading reduces men’s net returns by 265 percentage points a year as opposed to 172 percentage points for women It’s not what a man don’t know that makes him a fool, but what he does know that ain’t so Josh Billings, nineteenth century American humorist It is difecult to reconcile the volume of trading observed in equity markets with the trading needs of rational investors Rational investors make periodic contributions and withdrawals from their investment portfolios, rebalance their portfolios, and trade to minimize their taxes Those possessed of superior information may trade speculatively, although rational speculative traders will generally not choose to trade with each other It is unlikely that rational trading needs account for a turnover rate of

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Boys will be Boys: Gender, Overconfidence, and Common Stock Investment

/pdf/research-design-qualitative-quantitative-and-mixed-methods-1m92m1x5gg.pdf

Research Design: Qualitative, Quantitative, and Mixed Methods Approaches

Human-computer systems have traditionally been analysed and described in terms of their components - humans and computers -plus the interaction. Several contemporary schools of thought point out that decomposed descriptions are insufficient, and that a description on the level of the system as a whole is needed instead. The dependability of human-computer systems must therefore refer to the performance characteristics of the joint system, and specifically the variability of human performance, not just as stochastic variations but also as purposeful local optimisation.

Dependability of joint human-computer systems

Command and control settings are increasing in complexity, and are likely to continue to do so with the envisioned increase in communication and cooperation between interdependent networked units. This paper describes two microworld studies, with a focus on a method for the management of constraints in network-based command and control. The method enables the recognition, modeling, and analysis of constraints, combining goals-means task analysis, functional modeling, essential variables analysis, and generation of constraint-based recommendations for the design of tasks and interfaces. The first microworld study utilizes an emergency management task, the second an adversarial command and control task.

Functional modeling and constraint management in command and control: two microworld studies

This chapter considers the issue of how humans and machines can work together to accomplish a given and common goal. This has traditionally been referred to as the problem of function allocation. The origin of the verb therefore refers to the notion of a place in either a physical or a functional space that is something which has a location or can be associated to a recognisable part of the system. A fundamental feature of all function allocation methods is that they impose, or are based on, a principle of decomposition. Possibly the best illustration that humans function differently than machines is provided by the way in which functions are allocated among humans. The function congruence must be complemented by a set of rules that guides the function re-distribution, keeping in mind the constraints stemming from limited resources and inter-functional dependencies. Function congruence in human-machine systems is exemplified by dynamic task allocation, example Vanderhaegen, 1992.

From Function Allocation to Function Congruence

The recent financial crisis has made it paramount for the financial services industry to find new perspectives to look at their industry and, most importantly, to gain a better understanding of how the global financial system can be made less vulnerable and more resilient. The primary objective of this book is to illustrate how the safety science of Resilience Engineering can help to gain a better understanding of what the financial services system is and how to improve governance and control of financial services systems by leveraging some of its key concepts. Resilience is the intrinsic ability of a system to adjust its functioning prior to, during, or following changes and disturbances, so that it can sustain required operations under both expected and unexpected conditions. This definition is focused on the ability to function, rather than just to be impervious to failure, and thereby bridges the traditional conflict between productivity and safety. The core concept of the book is that the behaviour of the financial services system is the result of the tight couplings among the humans, organizations and technologies that are necessary to provide complex financial functions such as the transfer of economic resources. It is a consequence of this perspective that the risks associated with these systems cannot be understood without considering the nature of these tight couplings. Adopting this perspective, the book is designed to provide some answers to the following key questions about the financial crisis: - What actually happened? - Why and how did it happen? - Could something similar happen again? How can we see that in time and how can we control it? - How can sustainable recovery of the global financial system be established? How can its resilience be improved?

Erik Hollnagel

Papers

Dependability of joint human-computer systems

Functional modeling and constraint management in command and control: two microworld studies

From Function Allocation to Function Congruence

Governance and Control of Financial Systems

Cognitive models, cognitive tasks, and information retrieval