Inference under the law of small numbers: Earnings streaks rather than earnings numbers⁎
Abstract
This chapter seeks to unify important aspects of decision-making under uncertainty and the influence of heuristics by applying bounded and ecological rationality principles. The message of the chapter underscores the very important contribution that our understanding of heuristics could make to the study of fast-and-frugal decision-making in financial markets. By using models of bounded and ecological rationality, it explores the possibility of applying heuristics such as the “Take-the-Best” heuristic in stock selection decision-making problems. The chapter draws attention to the potential of employing such fast-and-frugal models as opposed ...
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