Representative bias vs categorisation under Availability bias

TTKDD

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
Schweser Bk 1 Pg 192 defines ‘representative bias’ (Part of cognitive error -belief perseverance)
Schweser Bk 1 Pg 196 defines ‘categorisation under availability bais’ (Part of cognitive error -processing bias)
The one difference I could spot between both is that in categorisation it insists on ‘first categorised’.
Can anyone please add as to what the dfference is and how I could identify which is which?
Thank you
 
I have registered them as follows:
representative bias - having the information lead to placing the investment to a predefined category and therefore assuming the outcomes vs objectively completimg the research to identify the outcomes
Example: a popular icecream joint is empty - last time this occurred there was a recession therefore we are heading to a recession
availability bias - base rate neglect - overweight the information based on last/most registered situation
Example: The retired CEO says “hey again the company’s inventory levels have increased significantly - the last time this occurred, the company’s stock plunged 50% so it will occur again”. The base rate here is a) could be the mfg unit could not produce at the pace of sales or that b) sales book has just been hijacked by competitor
Not considering what lead to the outcome is base rate neglect
 
That’s quite confusing!
For me anyway.
Everything I have ever read on Behavioural finance including CFA text books appears to associate base rate neglect (and sample size) with Representative bias, NOT availability bias as you suggest?
 
Back
Top