Investment Mistakes

Investment Mistakes - Investment Mistakes Similar to...

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Investment Mistakes - Similar to deciding how or where to invest your own money - Managers need to decide how to invest the company’s money in areas such as: - software Hardware Other forms of technology - Following the analogy used to explain bad personal investments. .. - Possible as to how individuals make business investment decisions such as: Overconfidence that a particular system (which has been chosen) will be the best Failing to consider other system possibilities Optimism that the decision made is the best for the future Convincing themselves that random events are not truly random people tend to stick with companies and systems they know (maintain status quo) and do not research or consider alternative options (bias against action) which is required under rational decision making 3 Alternative Decision Making Models: - b ec a us e p eople do not be h ave rationally, d ecision m aking h as be e n conc eptualized i alternative ways, such a s: - Behavioural Approach – does not assume logical processing, and does recognize limited rational behaviour = bounded rationality Bounded Rationality individuals choose the best option within a limited set. People cannot process or generate all possibilities. - Decisions are ba s e d on following pa st s et guidelines - Decisions are ba s e d on p ast succ ess es or failures Sub-optimizing = choos e the 2 nd best option because world is not ideal Satisficing – assess choices until one meets needs and then stop. Might not be the best solution.
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This note was uploaded on 04/13/2011 for the course BMOS 2240A taught by Professor Schermer during the Fall '11 term at UWO.

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Investment Mistakes - Investment Mistakes Similar to...

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