Thursday, July 31, 2008

Hindsight Bias Exemplified

I find Legg Mason Q2 2008 letter very interesting, especially from the hindsight bias perspective.

Bill Miller has noted that many people has stated the obvious (i.e. he should have avoided housing stocks, financial stocks etc and he should have stocked up oil companies) from the events that have passed, but nobody is able to state what is obvious NOW. This implies that most (if not all) people suffers from hindsight bias. We emphasize/over-stress on what should have been.

You may also find the letter interesting too.