QUESTION: 1

HINDSIGHT BIAS:

The phenomenon of the "Hindsight bias" was originally empirically studied by Baruch
Fischhoff. The "I knew it all along" phenomenon is an example of hindsight bias, the
mistaken belief that an occurrence is more foreseeable after it has been apparent rather than
before it had become known. There are three components to hindsight bias: skewed
memories, erroneous estimates of the probability of outcomes, and overconfidence in one's
own ability to forecast the future. People are biased in their use of hindsight because of (a)
cognitive inputs (they only remember information that supports what they already know to be
true and use sense - making to enforce significance based on their own understanding), (b)
meta-cognitive stimuli (the simplicity with which a prior result is comprehended may be
incorrectly attributed to its anticipated prior probability) 1, & (c) motivated impulses (Most
individuals want to believe that the world is predictable & orderly so that they may dodge
responsibility for any troubles they encounter). The effects of hindsight bias also include
overconfident sense of one's own judgements and a tendency to focus too narrowly on a
single causal interpretation of the past (to the exclusion of alternative valid explanations).
While new data visualisation tools may unintentionally increase hindsight bias, it may be
mitigated by interventions that prompt users to explore several possible interpretations for an
event.2

For instance, after watching a football match, you can claim that you always knew which
team was likely to come out on top, even if you were only a spectator. Students in both high
school and university often encounter hindsight bias as they go through their educational
experiences.

Previous studies conducted by other researchers have connected to this topic. Theories of
hindsight bias may be broken down into three distinct conceptual frameworks: ‘memory,
reconstruction bias, & motivations.3

1
Pohl,R F and others, 'SARA: A cognitive process model to simulate the anchoring effect and hindsight bias'
[2003] 11(4-5) American Psychological Association <https://doi.org/10.1080/09658210244000487> accessed
29 October 2022.
2
Neal J. Roese and Kathleen D. Vohs, 'Hindsight Bias' [2012] 7(5) Perspectives on Psychological Science 411-
426.
3
Hartmut Blank and others, 'How many hindsight biases are there? ' [2008] 106(3) Cognition
<https://doi.org/10.1016/j.cognition.2007.07.007> accessed 29 October 2022.
Reconstruction Bias- Most scholars believe that in order for hindsight bias to occur in a
memory paradigm, the subject must be unable to recall the original response, and the bias
itself arises from the participant's effort to reconstitute the original response after retrieval has
failed. In many ways, this recreation serves as a mental recreation of the foresight situation,
in which the actual response was not yet known.

It is often assumed in ‘Metacognitive hindsight bias theories’ that one's capacity to accurately
answer questions serves as a guiding principle in the regeneration phase while dealing with
Reconstruction Bias. Whenever individuals cannot recall their first response, Schwarz &
Stahlberg (2003) proposed that they recreate a credible response using the accurate response
as an anchor. The investigators, nevertheless, showed that the amount to which an anchor is
effective relies on the reader's self-perceived level of expertise. When subjects were informed
that their first estimates were near to the right estimates, they anchored more closely to the
accurate estimates and displayed more hindsight bias than when subjects were informed that
their initial estimates were overestimates or underestimates of the correct estimates.4

EXPERIMENTAL DESIGN:

Parents often inquire about their children's school experiences. The common response from
kids is "nothing." One possible explanation for this is because people, whether they are
youngsters or adults, tend to forget what they learned and instead believe that they "knew it
all along." Recoding new information as "I knew it" may create an illusion of comprehension
and prevent toddlers and adults from learning from their mistakes. Some people think that
hindsight bias as adaptive, arguing that it's smarter to change one's mind after learning the
right answer than to keep thinking one was right to begin with.
Both of these interpretations of hindsight bias that it causes people to forget what they've
learned and also that it's really a sort of adaptive learning suggest that it actually helps people
retain information. Both the failure-to-remember and adaptive-learning perspectives consider
whether or not we retain information as it evolves. Is it true that students who believe they do
not learn anything in school really do worse academically than their peers who have the
opposite belief? Is it true that those who believe they know everything tend to be less
receptive to fresh information?
HIGHLIGHTING THE ASPECT THAT ARE DIFFERENT FROM OTHER AND WHY I
MADE THE CHANGES:
4
Daniel M Bernstein and others, 'Looking backward and forward on hindsight bias' [2016] The Oxford
handbook of metamemory <https://psycnet.apa.org/record/2016-05591-015> accessed 29 October 2022.
I established that individuals make a substantial cognitive blunder when they rely on their
own memories of the past to make decisions in the present. capacity to accurately answer
questions, as described in the 'Metacognitive hindsight bias theories'. And in my Design of
experiment, I found that it is preferable to add the right answer to someone's existing body of
knowledge rather than mistakenly believe that one's initial response was accurate. The
capacity to correctly remember a response when prompted to do so at the conclusion of an
experiment was operationalized as learning in my approach. More research is required to
understand the connection among hindsight bias & learning, as was the case with the
connection involving hindsight bias & theory of mind.

QUESTION: 2

Questionnaire:

1. To what extent does one's degree of skill mitigate the effects of hindsight bias?
2. To what extent were you able to learn from your mistakes as an investor, given that
some people actively avoid thinking about their prior failures?
3. When attempting to foretell whether an investment will yield a loss or a profit, should
a person who is an investor take into account both technical and fundamental analysis,
as well as any other?
4. Whether or not speculators are unwilling to admit they have no way of knowing what
will happen?

Analysis:

Think of your investments like stock. No matter how skilled you are, it is never easy to make
daily judgments on where to put your investments in the stock market.

However, if you make a series of transactions which further turns out to be much more
successful than expected, you may begin to believe that your success is a direct result of your
skill. Your self-assurance might rise as a result. As your hindsight bias causes you to
overestimate your knowledge, you may start taking greater chances. Now picture if those
very same investments had failed. You may feel bad about yourself for botching things even
if you had no control over the situation.

These investors may have a distorted view of their own abilities and think too highly of the
quality of their own judgments. Investors' financial security might be jeopardised as a result
of their taking more risks.
These investors may have a distorted view of their own abilities and think too highly of the
quality of their own judgments. Because of this, the investors may make judgments that are
too risky, imperilling their wealth. People who suffer from this bias as investors often make
predictions based on their written judgements.

The benefit of hindsight comes at the expense of a cognitive prejudice known as hindsight
bias. When we think about the past and make associations between events, we improve and
we learn from our failures. While it's true that hindsight is a great resource for the future, it's
also important to keep in mind that it isn't always accurate when interpreting the past.
However, the more we learn about our inherent prejudices, the more we may find ways to
overcome them. Investors who avoid making these sorts of blunders increase their risk since
they never have the chance to learn from their mistakes and become better.