homework6

homework6 - Mitch McMichael AEM 4230 Contemporary Topics in...

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Mitch McMichael AEM 4230 Contemporary Topics in Applied Finance Wednesday, November 10, 2010 Homework 6 1. The baseball batting average analogy is that even though a batter might have an average of .333, which means he fails 66% of the time, but keeps getting back to the plate and makes millions of dollars doing it. This might be a stretch but I believe the bias that relates to this analogy could be loss aversion. If you go by the batters stats he misses the ball more often then not, so there is not a great expectation that he will hit the ball. But if he does hit it he gets a big reward, so he might as well keep swinging away. The risk would not be worried about until his average is so low that he might be cut from the team. 2. This suggestion very blatantly relates to a phenomena described in chapter one such as overconfidence. Hubris syndrome is almost word for word the definition of being overconfident. A person who suffers from Hubris syndrome will be out of touch with reality, and overestimates one’s own competence and capabilities,
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This note was uploaded on 01/08/2012 for the course AEM 4230 taught by Professor Bogan,v. during the Fall '08 term at Cornell.

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homework6 - Mitch McMichael AEM 4230 Contemporary Topics in...

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