The Confirmation Bias of Brazilian Investors

23.07.2016 • Emerging Markets

From Daily Pro (Brazil)-

As a lover of the Corinthians (Sao Paulo’s soccer team) and as an excellent amateur defender, I’ve always had sport idols. Almost all Corinthians, almost all attackers – a defender is hardly ever one by free will.

Among my most recent idols, however, I confess to the reader some frustration: Paolo Guerrero emerged as a martyr, it reminded me of the good times of Luizão and it made me wear the number “9”, replacing the worn out “4” that once belonged to the eternal Gamarra…

Today, however, the Peruvian became a common player. This phase stopped, the charm is over – whatever!

Following the movement of the markets at the beginning of this year, I have found a plausible explanation for my temporary admiration for the striker: the confirmation bias.

You believe what you want to believe. And seek (selectively) the arguments that support your belief. Maybe Guerrero was so good because he belonged to the Corinthians.

Ibovespa confirmed yesterday the sixteenth high in the last 18 trading sessions, accumulating a gain close to 10% in July.

It’s the same stock market as it was a month ago, but it seems much more attractive at 57,000 points than 45,000, but really it should be the opposite. The confirmation bias (expectation) took over the markets, and Brazil (the same Brazil, the same stock market) turned the tables…

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