Author: Guido Baltussen, Head of Quantitative Research & Strategy Fixed Income and Multi Asset at NN Investment Partners, and Associate Professor, Erasmus University Rotterdam.
To a large part, returns experienced in the past determine the decision we make for the future. This is one of the most important lessons recent behavioral finance research learns us. Be aware of this ‘extrapolation bias’ pitfall. It may have repercussions for you in the end!
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