Humans can't analyze all the information received

Humans Can't Analyze All the Information Received

This one minute video shows that human attention is limited and that we can’t analyze all the information we receive.

http://viscog.beckman.illinois.edu/flashmovie/15.php

We tend to pick the information that we need to prove that our thinking is correct.

If we are bullish and long the financial market, we tend to read bullish reports. Individuals have a tendency to simplify decisions (good company -> good investment, momentum strategies -> chasing performance).

Furthermore, investors believe their information is correct and they are better at interpreting information and making decisions. We have an inability to fully incorporate new information into risk and return forecasts. The failure to recognize the true risk of an investment makes us trade more frequently than can be justified by the information. Also, we tend to remember only the good decisions so our memories don’t disagree with our opinion on our abilities.

Check a slide show: The Human Brain…tricks us whenever it can!

This newsletter was first published in September of 2010

http://bourbon-fm.com/file/BFM_Newsletter_09_2010_Video_Gor.pdf