CytoSorbents Corporation (CTSO)

[ranchhand71]

Given your experience fully understandable. Most have challenge of uncoupling hard firm past experience with uncertain future opportunity.

Behavioral economists have uncovered a laundry list of faulty heuristics that underlie many of our investment decisions involving risk.


Some of the screwy cognitive tendencies include:

•Overweighting Losses: In a seminal study on behavioral economics that outlined Prospect Theory, Daniel Kahneman and Amos Tversky demonstrated what many of us who have had a tough weekend in Vegas know to be true – losses tend to loom larger in our minds than gains.

•Anchoring: Without realizing it, we often identify a reference point for an investment’s value, usually the first price we see. Once we are “anchored,” we have trouble shifting our views in response to new information.

•Mental Accounting: We love to bucket and compartmentalize – “this pot of money is my ‘risky’ capital, and this pot of money is where I play it safe.” In reality, it’s all the same pot, and one investment strategy should be applied across all of our assets.

•Confirmation Bias and Hindsight Bias: We are inclined to seek information that confirms our current beliefs, and we extrapolate too much from the past. One consequence: when we make money in the stock market, we tend to conflate luck and skill.

•Herd Behavior: Because we are naturally social, sitting on the sidelines during a fast-moving market can be tough. For investment advisors, the pressure is worse – even when you’re fundamentally right in the long term, going against the herd in crazy times can mean your reputation or your job.