Abstract Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences,…
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As part of a recent discussion in the Mentor Program we looked at the nature of returns and how they can be distributed in the real world which is very different to how you want them to be distributed in your head. For the conversation I posted the graph below which is a series of…
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I found this fascinating and it had me drawing bikes on a blank piece of paper. The central issue is that we actually know less about he world than we think we do. These errors abound in simple tasks and in our understanding of the way the world works. It is natural therefore that such…
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This is a bit of a Sunday morning tea and toast ramble, so if you have something more important to do like catch up on Housewives of Melbourne aka Slappers of Bleak City or you are you are wondering what happened in the latest episode of My Kitchen Dickheads I suggest you pop off now. I…
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Our perceptions, of risk or anything else, are products of cognitive processes that operate outside our conscious control — running facts through the filters of our feelings and producing subjective judgments that disregard the evidence. The behavioral scientists Melissa Finucane and Paul Slovic call this the Affect Heuristic; it gives rise to what I call…
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At our recent gathering in Perth we looked at quite a bit of the trader psychology that occurs around certain moves. LB has an exercise where she puts up a given chart with the sort of generic responses that traders generate at each phase of the move. The audience is then asked to critique what…
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I saw this pop up today. The tale of Ronald Wayne is somewhat legendary. He was one of Apples original founders but sold his original stake for $800 and later on accepted an additional $1500 to forfeit any future claims against the company. As the billboard states his stake today would be valued at around…
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Trading is an arena that is rife with metaphors. Every so often some taking head or idiot broker will trot out Rothchilds remark about not buying until there is blood in the streets. Or you will be told to buy Sun Tze Art of War. If they are slightly better educated (doubtful) they might mention…
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