Round-up

1. Via the FT, Vanguard on the psychology of financial bubbles. Not particularly different to any other piece of work I’ve seen on bubbles.

The unanswered, and most interesting question: how does a bubble pop?  Uniformed individual investors are the culprits for inflating bubbles, so how/why does the price start trending downward? What causes the reversal? Can the reversal be moved forward to prevent them?

2. The left-digit bias, from pens, to cars, to stocks. It matters. Is there a substantial difference for society? Is there an optimal modulus for a society to think in? (HT Planet Money)

3. The crowd needs the statistician to be wise too. I don’t think this is a valid threat to the idea, merely that you need to be aware of the data generating process to use the correct mean. Same idea as with removing outliers.

4. Helping consumers through feedback loops, now in the AER. This could be a big win for online brokerage models – most people don’t have accurate perceptions of their own returns.

5. Financial education is not effective. But there are other options.

6. Going to a financial advisor is worse than the dentist?

 

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