◐ Behavioral
◆ The PatternOver-relying on the first piece of information encountered (the "anchor").
Anchoring — over-relying on the first or most prominent piece of information as a reference point.
Your buy price ($50) → stock drops to $30 → "it's cheap" ← anchored to $50, not to intrinsic value
Common anchors:
• Purchase price ("I'll sell when I get back to even")
• 52-week highs ("it was $100, now $60 — bargain!")
• Round numbers ($100, $10,000 Bitcoin)
• Analyst price targets
• Purchase price ("I'll sell when I get back to even")
• 52-week highs ("it was $100, now $60 — bargain!")
• Round numbers ($100, $10,000 Bitcoin)
• Analyst price targets
Solution: value assets on future fundamentals, not past prices.
Pattern bridge: Anchoring to a reference price is the psychological cousin of the mean — a central value everything is measured from. In ML, weight initialization anchors where training begins.