◐ Behavioral
◆ The PatternPreference for the current state.
Status quo bias — preference for the current state of affairs; any change is perceived as a loss.
In investing:
• Never rebalancing a portfolio → allocation drifts far from target
• Sticking with an underperforming fund because switching feels risky
• Default 401(k) allocation → most employees never change it
• Holding inherited stocks forever regardless of fundamentals
• Never rebalancing a portfolio → allocation drifts far from target
• Sticking with an underperforming fund because switching feels risky
• Default 401(k) allocation → most employees never change it
• Holding inherited stocks forever regardless of fundamentals
Related to loss aversion: changing feels like a potential loss (of the current state), while the current state feels "free." It isn't.
Pattern bridge: Preferring the current state over change. In ML, L2 regularization pulls weights toward zero — a mathematical preference for the status quo.