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Availability Heuristic

Availability is a cognitive heuristic in which a decision maker relies upon knowledge that is readily available rather than examine other alternatives or procedures.

"There are situations in which people assess the frequency of a class or the probability of an event by the ease with which instances or occurrences can be brought to mind. For example, one may assess the risk of heart attack among middle-aged people by recalling such occurrences among one's acquaintances. Similarly, one may evaluate the probability that a given business venture will fail by imagining various difficulties it could encounter. This judgmental heuristic is called availability. Availability ia a useful clue for assessing frequency or probability, because instances of large classes are usually reached better and faster than instances of less frequent classes. However, availability is affected by factors other than frequency and probability. Consequently, the reliance on availability leads predictable biases,[...]"
Tversky and Kahneman (1974)

It is easier for us to recall information which has recently arrived. Stocks with very high levels of press coverage underperformed in the subsequent two years

"We find that overestimation of the subjective probabilities can cause overreaction and underreaction of expectations and, subsequently, asset prices."
Chiodo et al. (2002)

Overreact to news

Saliency can cause investors to overreact to new information.

Availability - evaluation about frequency, probability, and causality relationships that relies on how easily information is recalled from memory

Availability heuristic (how easily things come to mind): Tversky and Kahneman (1973).
Taleb (2004)

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Top 10

  1. TVERSKY, A. and D. KAHNEMAN, 1973. Availability: A heuristic for judging frequency and probability. Cognitive Psychology. [Cited by 604]
  2. SCHWARZ, N., et al., 1991. Ease of retrieval as information: Another look at the availability heuristic. Journal of Personality and Social Psychology. [Cited by 103]
  3. CARROLL, J.S., 1978. … an event on expectations for the event: An interpretation in terms of the availability heuristic. Journal of Experimental Social Psychology. [Cited by 38]
  4. FOLKES, V.S., 1988. The Availability Heuristic and Perceived Risk. Journal of Consumer Research. [Cited by 23]
  5. WAENKE, M., N. SCHWARZ and H. BLESS, 1995. The availability heuristic revisited: Experienced ease of retrieval in mundane frequency estimates. Acta Psychologica. [Cited by 19]
  6. SCHWARZ, N. and L.A. VAUGHN, 2002. The availability heuristic revisited: Ease of recall and content of recall as distinct sources of …. Heuristics and biases: The psychology of intuitive judgment. [Cited by 19]
  7. MACLEOD, C. and L. CAMPBELL, 1992. … accessibility and probability judgments: An experimental evaluation of the availability heuristic. Journal of Personality and Social Psychology. [Cited by 16]
  8. CERVONE, D., 1989. … envisioning future activities on self-efficacy judgments and motivation: An availability heuristic …. Cognitive Therapy and Research. [Cited by 10]
  9. SHEDLER, J. and M. MANIS, 1986. Can the availability heuristic explain vividness effects. Journal of Personality and Social Psychology. [Cited by 9]
  10. GABRIELCIK, A. and R.H. FAZIO, 1984. Priming and frequency estimation: A strict test of the availability heuristic. Personality and Social Psychology Bulletin. [Cited by 9]