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Presentation For HRDC

This document summarizes common cognitive biases that influence human judgement and decision making. It discusses biases like overconfidence, which leads to overestimating one's abilities; confirmation bias, in which people seek information confirming existing beliefs; and anchoring bias, where people rely too heavily on the initial information provided. The presentation aims to make people aware of these biases so they can recognize how biases can impact decisions and lead to irrational behavior. Understanding cognitive biases can help improve judgement and reduce predictable inconsistencies.

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ajaz ul islam
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49 views16 pages

Presentation For HRDC

This document summarizes common cognitive biases that influence human judgement and decision making. It discusses biases like overconfidence, which leads to overestimating one's abilities; confirmation bias, in which people seek information confirming existing beliefs; and anchoring bias, where people rely too heavily on the initial information provided. The presentation aims to make people aware of these biases so they can recognize how biases can impact decisions and lead to irrational behavior. Understanding cognitive biases can help improve judgement and reduce predictable inconsistencies.

Uploaded by

ajaz ul islam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Biases of Judgement

or
Perception is Reality
Presented By
Ajaz Ul Islam
Assistant Professor (BBA)
Govt. Degree College Kulgam

84th General Orientation Course


Organised By
UGC-Human Resource Development Centre
(HRDC)
University of Kashmir
Outline of Presentation
Confirmation Availability
Introduction
Bias bias

Over- Conservatism Ambiguity


Optimism Bias Aversion

Over-
Anchoring Conclusion
Confidence

Cognitive Representativ
Dissonance e Heuristics
Introduction
Of all the ways of defining men the worst is the one which
makes him out to be a rational animal.
(Atanole France)

These are systematic patterns of deviation from norm or


rationality in judgement.
These induce optimistic and pessimistic judgements made
under ambiguous information, influenced by emotional
state rather than rational state.
Over Optimism
• Ability of people to exaggerate their own abilities
• For Example
If we ask in class room how many of you will make it to top 50% of students.
80% will answer in affirmative (30% are exaggerators)

Illusion of Control
Self attribution Bias
Over Confidence
To hold a false and misleading assessment of our skills Knowledge or
intellect

This leads to over estimation


of knowledge, ability or skills
and under estimation of risk.

For Example: Answer to


simple Factual questions
(Fishor and Phillips)
Cognitive Dissonance
A mental conflict which People experience when they are presented with
evidence that there beliefs or assumptions are wrong.

People have an
incredible degree of
self denial
Confirmation Bias
People’s desire to find information that agrees with their existing
view.
Any information which conflicts with your view is ignored
and information that supports your view is exaggerated.
Conservatism Bias
• Tendency to cling tenaciously to a view or a forecast.
• Once a position has been stated people find it very hard to
move away from that view.

For Example:
Investors cling to a view
and forecast and when
produced with new
findings they resist its
acceptance
Anchoring
When faced with uncertainty people will grasp at straws in
order to find a basis for their view.
Representativeness Heuristics

When the similarity of events or objects lead to your


judgement rather than rationality

B
Availability Bias
Human Tendency to think that examples of things which come readily to your
mind and more representative than actual case.
For Example: Deaths in US by shark attacks and falling airplane parts .
Ambiguity Aversion
People are extremely afraid of situations involving risks.

It is the tendency to favour known risks over unknown risks.


For Example: People’s willingness to bet when distribution of balls in known
Conclusion
• These biases can lead us to astray as we need to be aware of
how potential biases can have a potential impact on our
decisions. These judgemental biases can lead to biased
thinking and decision making leading to
Biased Judgement while evaluating alternatives
Predictable inconsistency
Decisional errors
Irrational behaviour
Higher investment with lower returns.
References
• Montier, J. (2003). Behavioural Finance: Insights into irrational
minds and markets. Wiley Finance
• Bloomfield, R. and Hales, J. (2001). Predicting the next step of
random walk. Cornel University working Paper.
• Cornell, B. (1993). Corporate Valuation. McGraw-Hill.
• Shleifer, A. (2000). Inefficient Markets: An introduction to
Behavioural Finance. OUP
• Thaler, R. and Lamont, O. (2000). Can markets add or subtract.
University of Chicago, Working Paper.

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