Status quo bias

From Wikipedia on Status quo bias:

Status quo bias is an emotional bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss. Status quo bias should be distinguished from a rational preference for the status quo ante, as when the current state of affairs is objectively superior to the available alternatives, or when imperfect information is a significant problem. A large body of evidence, however, shows that status quo bias frequently affects human decision-making.

Status quo bias interacts with other non-rational cognitive processes such as loss aversion, existence bias, endowment effect, longevity, mere exposure, and regret avoidance. Experimental evidence for the detection of status quo bias is seen through the use of the reversal test. A vast amount of experimental and field examples exist. Behavior in regard to retirement plans, health, and ethical choices show evidence of the status quo bias.

Something for investors to think about.

Posted by on May 3rd, 2016 at 12:02 pm


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