Original source: SimoleonSense.com .
My friend Tim of the PsyFi blog has a written a fantastic thought paper on our bias towards round numbers. This is a very very good post. I also recommend reading the cited literature..Cheers.
Click Here To Read: A New Financial Bias? Irrational Numbers -Price Clustering and Stop Losses
Introduction (via PsyFiBlog)
One of the odder things about the universe is that the small set of numbers that define its structure, the so-called universal constants, don’t seem to have any structure of their own. You’d have thought that whatever immortal deity breathed life into the whole shebang would have at least have bothered to make sure that reality was defined in simple integer values your average gameshow contestant could remember. Yet someone’s just calculated Pi to more decimal places than you can read in a lifetime. The universe is strangely irrational, it would seem.
More likely, however, is that the irrationality lies in our heads. If you look at the way we treat numbers for investment purposes it’s probably a good job the infinite cosmos is specified in irrational numbers, because if it were otherwise we’d probably have sold it to the lowest bidder eons ago. Humans, it seems, treat numbers as an approximation to reality, unlike reality; which treats humans as an approximation to nothing.
Click Here To Read: A New Financial Bias? Irrational Numbers -Price Clustering and Stop Losses
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