Santa left us an unexpected gift: two small teachings!
The month of December and its unavoidable figure - Santa Claus - are now behind us! Regardless of the gifts placed in our shoes, he offers us a playful parallel with some of the trends polluting our decisions.
An important choice of color...
It was impossible last month not to be attracted by a Santa Claus declined in various forms (costumes, stuffed animals, posters ...) and systematically bright red ... A choice of color important in many areas and especially in China where red is synonymous with prosperity ... and which can even influence some of our management acts
Thus, a study(1) teaches us that we reduce our acceptance of the risk of loss by 20% when it is expressed in red, the usual color of danger! Another effect of the color is that we are more pessimistic about the future performance of a stock when past negative performances are expressed in red (14.8% less propensity)! Experiments conducted with yellow and blue (two colors perceived by our brain as being as different from black as red) confirm that only the color of Santa Claus is involved!
If the framing bias, which is defined by the influence of the mode of presentation on the decision, generally refers to the arguments put forward, this study opens up a new dimension: it makes us aware of the influences linked not to the presentation of the substance, but to the form. The impact of the form on our financial decisions is certainly worth keeping in mind at a time when society is evolving more and more towards visual communication, using images and videos!
... but a belief close to those that persist in adulthood!
The field of research being limitless, there are a few studies trying to explain why adults encourage children to believe in Santa Claus(2), but especially one(3) demonstrating rationally - if need be! - that 350,000 tons of gifts traveling at 650 miles per second (that is, nearly 4 billion kilometers per hour) puts too much pressure on Santa Claus’s shoulders!
If children find a certain happiness in believing in Santa Claus, other beliefs (erroneous or true) also affect the not-so-young. Two studies from 1982 and 2010(4) conclude that more than 50% of students do not question the result given by a calculator - authoritative - previously rigged for the experiment, after seven wrong answers to easy problems!
We easily cling to beliefs when making decisions: unlike simple information, the belief is anchored in us and is imposed as a matter of course without being questioned. The consequences of the usual beliefs (full market efficiency, preconceived ideas about asset classes, certainty about the right allocation, etc.) in financial decisions are numerous: they range from the "simple" risk of scamming (belief in "miraculous" investments), to the risk of bubbles or crashes (collective beliefs), to erroneous individual decisions. So let's not hesitate to question ourselves and to question what seems obvious!
Thank you to Santa Claus for believing in me and letting me write about his outfit and the belief he inspires.
(1) « Visual Finance: The Pervasive Effects of Red on Investor Behavior »
(2) "Contribution à une théorie de l'abandon des croyances : la fin du Père Noël", Gérald Bronner, 2004
(3) “Is there a Santa Claus?” by Richard Waller published in January 1990 in Spy Magazine
(4) Electronic Bullies », Lois Timnick, February 1982 and “The Authority of the Calculator in the Minds of College Students” by Bob Glasgow et Barbara J. Reys, 2010
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