How Understanding False Memories make us Better Investors
By Dr Wealth  •  May 11, 2014

In 2001, psychologists Sharon Hannigan and Mark Reinitz conducted a classic experiment to study the effect of memory ‘illusions’. They first showed participants a series of pictures, amongst them ‘effect’ photos. An ‘effect’ is one that depicts an outcome. For example, oranges scattered on a supermarket floor or a lady sprawled after suffering a fall.

hannigan

1. Cause (banana peel) and 2. Effect (fall)

After variable intervals ranging from 15 minutes to 48 hours, they showed the same participants another series of pictures and asked them to identify which ones they have seen before. Within this series Hannigan and Reinitz inserted ’cause’ pictures.

Cause pictures are ones that contain a probable cause of an outcome picture that they have seen before. In this case it could be someone reaching for an orange from the bottom of the stack or a banana skin littered on the floor.

They discovered that a significant ...

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By Dr Wealth
Dr Wealth provides trusted financial education to individuals. We teach researched and actionable investment methods so that our graduates are successful in their investment journey and achieve market-beating returns.
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