Open AccessEffect of heuristic anchoring and adjustment, and optimism bias, in stock market forecasts
Author(s) -
Víctor Alberto Peña,
Alina Gómez Mejía
Publication year - 2020
Publication title -
revista finanzas y política económica/revista finanzas y política económica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.121
H-Index - 3
eISSN - 2248-6046
pISSN - 2011-7663
DOI - 10.14718/revfinanzpolitecon.2019.11.2.10
Subject(s) - optimism , anchoring , pessimism , econometrics , actuarial science , economics , index (typography) , stock market , heuristic , psychology , computer science , social psychology , geography , philosophy , context (archaeology) , archaeology , epistemology , artificial intelligence , world wide web
Stock market forecasting is an important and challenging process that influences investment decisions. This paper presents an experimental design that aims to measure the influence of the anchoring and adjustment heuristic and optimism bias in these forecasts. The study was conducted using information from the S&P MILA Pacific Alliance Select financial index; this was presented to 670 students from the cities of Concepción (Chile), Cali (Colombia), and Lima (Peru). Data was collected and presented through an instrument that asked participants to make a forecast judgment of the said financial index, based on the presented graphics, representing a year, a month, a week, and the last closing value of the index. Thus, it was possible to measure the influence of the anchor and adjustment heuristic in order to establish whether the presence of an initial value affected the financial forecast. Similarly, the study sought to determine whether the judgment issued was biased toward an optimistic or pessimistic position, thereby proving the presence of an error or expectation bias, known as optimism bias. The results were analyzed using the least squares method, and the data panel confirmed that the anchoring and adjustment heuristic influences the forecast of the financial index used in the study. Similarly, the presence of optimism bias in the cognitive process of forecasting in finance was inferred.