Dec

10

 The idea behind the peak-end rule is that the only thing that matters to people is how something ends, good or bad, and what the peak is. Like most behavioral psychology things, this one isn't tested in real life situations. I thought I'd make a substantive contribution in the real world. I looked at occasions when there was a peak at the very end. In particular when the close of the S&P was at the highest peak of the previous 10 days, sort of like the close on Monday, December 8. Also, at the converse when the close of the S&P was at the lowest peak of the previous 10 days.

Moves subsequent to                 highest peak       lowest peak

Number of obs                                   116               135

Move (and sd) to 1 days later           -1 (15)            2 (23)

The variability to the next day after the lowest peak end with a mean square of 529, which is more than twice as great as the variability after the highest peak. Perhaps the behavioral psychologists would like to add this real life difference in variability to their armchair ideas about the be all and end all of peak-end rules.


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