Admission Price: This event is free to attend
Speaker: Professor Adam Sanjurjo (University of Alicante)
Series: Department of Economics Seminar Series 2016-17
We find a subtle but substantial bias in a standard measure of the conditional dependence of present outcomes on streaks of past outcomes in sequential data.
The mechanism is a form of selection bias, which leads the empirical probability (i.e. proportion) to underestimate the true probability of a given outcome, when conditioning on prior outcomes of the same kind.
The biased measure has been used prominently in the literature that investigates incorrect beliefs in sequential decision making---most notably the Hot Hand Fallacy and the Gambler's Fallacy.
Upon correcting for the bias, the conclusions of prominent studies in the hot hand fallacy literature are reversed. The bias also provides a structural explanation for how belief in the law of small numbers can persist, even in the face of abundant experience.
This seminar is part of the Department of Economics Seminar Series 2016-17. The seminars are open to all - no registration necessary.