There are the normal discussions that go on around high-glossed conference tables of fabled moneymen. Then there's the discourse at Legg Mason Capital Management led by Chief Investment Officer Bill Miller. In deciding whether to buy Sherwin-Williams, a stock that was recently down 15% after news of potential litigation, Miller asks whether the selling pattern "fit the fallacy of vividness."
Fallacy of vividness? For those not versed in behavioral economics, that refers to how investors tend to latch onto the most recent piece of information and give it more weight than it statistically deserves. The answer was yes. Miller bought the stock at around $40. Today it trades around $47.
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Fallacy of vividness? For those not versed in behavioral economics, that refers to how investors tend to latch onto the most recent piece of information and give it more weight than it statistically deserves. The answer was yes. Miller bought the stock at around $40. Today it trades around $47.
Read the complete article
