Year: 2003
Type: article
Abstract: Streaks of events are ubiquitous yet understanding the behavioral effects of them has been restricted by the lack of testable hypotheses concerning the most basic question: When do we tend to follow streaks (positive recency), and when do we tend to go against streaks (negative recency)?From an analysis of positive recency in terms of adaptivity, I develop two elements of people's representation of the process generating a sequence which should be predictive of people's use of positive recency.The first factor is randomness, which has already been tested empirically, and the second is variability which is tested here.The context used is stocks because not only do people seem to give weight to streaks in the stockmarket, but recent evidence suggests that it may be beneficial to do so.Participants were told that a small company (more variable price) and a large company (less variable price) had experienced a streak of six months of increased/decreased stock prices.As predicted, participants were more likely to predict that the small company would continue the streak next month.However, regardless of the initial streak, participants tended to switch which company would do better between six months and ten years.The results show that there are interesting behavioral phenomena associated with streaks, and that Burns' (2001, under review) analysis generates testable predictions.
Author: Bruce D. Burns
Institution: Michigan State University
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2767576653