SharePortfolio managers can, like any other human being, find their judgment clouded by biases.explain how to guard against these biases for better decision-making. Even with a vast amount of up-to-the-minute data at their fingertips, portfolio managers are, like the rest of us, prone to natural human biases like overconfidence and lazy thinking. This can cloud their judgement in making rational investment decisions.
Unfortunately, system two is relatively slow and lazy. It demands conscious effort and generally checks in with system one before making a decision. So it imports those unconscious biases. emerges in the temptation to extrapolate historic trends into the future and falsely impute a causal link between events. This is particularly dangerous for portfolio managers, whose job is to understand the range of future outcomes.:"It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so". Wise words indeed from Mark Twain.
The outcome of this process is that portfolio managers construct more resilient portfolios, are better able to manage risk and can achieve better results aligned with their mandates.
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