This paper makes one think of the effect of actually having money in the trade, vs just sitting analyzing data on a Sunday. And the real question is still, how to be free of it? Or control for it?

"The tree of experience in the forest of information: Overweighing experienced relative to observed information." Uri Simonsohn, Niklas Karlsson, George Loewenstein, Dan Ariely


Standard economic models assume that the weight given to information from different sources depends exclusively on its diagnosticity. In this paper we study whether the same piece of information is weighted more heavily simply because it arose from direct experience rather than from observation. We investigate this possibility by conducting repeated game experiments in which groups of players are randomly rematched on every round and receive feedback about the actions and outcomes of all players. We find that participants’ actions are influenced more strongly by the behavior of players they directly interact with than by those they only observe.

[ … ]

One important distinction, when it comes to the process leading to acquisition of information, is whether the information was obtained through personal experience—i.e., in a process that had or could have had direct consequences for oneself—or only by observing the experience of others. We refer to the former as “experienced information” and the latter as "observed information."

Legacy Daily adds:

In Battle for Investment Survival Loeb says: "Knowledge born from actual experience is the answer to why one profits; lack of it is the reason one loses. Knowledge means information and the ability to interpret it marketwise. But, in addition, making money in the market demands a lot of "genius" or "flair." No amount of study or practice can make one successful in the handling of capital if one really is not cut out for it." I think that the education of one's own $1000 put to work in the market cannot be substituted by reading, theoretical analysis, or observation. My questions are: "Do you feel that making money in the market is a natural gift or a learned skill? To which one or two key factors would you attribute your success?"





Speak your mind

2 Comments so far

  1. David Whitesel on March 22, 2009 9:45 am

    This paper must have been commissioned by someone with an intent to apply it. its more of the same single valued logics that are circulated in support of mission statements.
    the papers goal is to establish either or constraints, no amount of rationalization can change that.

    if there were degrees of freedom present in this teams study, they might have arrived somewhere else. giving value to methodology depends on the methodologies flexiblity within a multi valued reference space.

    Classification limited to “experienced information” and the latter as “observed information.” is determnism at its best. Wholly inadequate to the challenges we meet, but highly useful to those who need by products of methodology, to sustain agenda.

    reduces to projective identification useful within the contexts of those that paid for it.

  2. David Whitesel on March 22, 2009 10:00 am

    With respect to Mr Dailys question; “Do you feel that making money in the market is a natural gift or a learned skill? To which one or two key factors would you attribute your success?”

    the answer depends on if you see the market as manifesting Market prices or contrivances. I am in the camp of the latter, sustaining the view that in todays market all prices are artifacts of some prevailing systems intent.

    so mr D if your employed within a system, and your systems is by its heirarchy relative to other systems, rated highly, you only need to show up to be successful. No talent or experience is necessary because the systems assured you an outcome up to the constrains of the program through which you operate.

    clear enough?


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