What is the definition of halo effect and gambler’s fallacy ? Can u give me an example of each , many thanks
Halo effect extend a favorable evaluation of some favorable characteristics to other characteristic. Can lead to extrapolate past returns into expected returns.
Gambler’s fallacy is the irrational belief in mean reversion. Practionners are the most prone to this bias. Demonstrate lack of understanding of statistical independence. Can lead to falsely expect price recovery in a downtrend.