Hot Hand Fallacy ✋
🧠 Psych - 88 / 100
Hey, there.
Let’s talk about the something different & interesting, Hot Hand Fallacy ✋.
What is it?
The "hot hand" was considered a cognitive social bias that a person who experiences a successful outcome has a greater chance of success in further attempts.
Examples -
The concept is often applied to sports and skill-based tasks in general and originates from basketball, where a shooter is allegedly more likely to score if their previous attempts were successful, i.e. while having "hot hands.”
Where does it occur?
While previous success at a task can indeed change the psychological attitude and subsequent success rate of a player, researchers for many years did not find evidence for a "hot hand" in practice, dismissing it as fallacious.
However, later research questioned whether the belief is indeed a fallacy. Recent studies using modern statistical analysis show there is evidence for the "hot hand" in some sporting activities.
Why do I need to know?
When gambling, as in investing, it is not uncommon to experience a good streak partly driven by momentum. However, the idea that favorable outcomes are a result of a hot hand is purely a phenomenon.
In reality, once an investor, and likely a gambler, begins to think they have a hot hand, many proven biases can arise.
Takeaways: -
Psychologists believe that the hot hand is a fallacy that stems from the representative heuristic, as identified by behavioral economics.
References & Studies: -
https://www.investopedia.com/terms/h/hot-hand.asp
http://en.wikipedia.org/wiki/Hot_hand
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