Morgan Stanley IM: Pattern Recognition - Opportunities and Limits
Explore the powers and perils of pattern recognition, which investors often credit. We define it, discuss when it works better, and offer ways to improve it.15.12.2023 | 07:03 Uhr
- We explore the powers and perils of pattern recognition, which investors often cite as a basis for action.
- While it can be powerful when applied appropriately, it can also be misleading and lead to overconfidence.
- We define pattern recognition, discuss when it tends to work well, review why it may be misleading, and offer ways to help improve it.
- Pattern recognition tends to work well in stable environments where cause and effect are clear and feedback is effective but poorly where causality and feedback are limited.