## ANCHOR

In Behavioral Finance the anchor represents the tendency of people to form evaluations starting from an initial value (reference point - still) and then making adjustments based on new information. The initial value can be the result of a measurement carried out in the past or formulated and suggested by other subjects able to influence the investors' estimates. This value represents an opportunity for the individual to engage the following values and adjustments.

The anchor is used by those who use technical analysis, ie the study of market price trends over time, in order to predict future trends by using graphical and statistical methods, with reference to trends and past values, that is operators have a strong propensity to use past prices and trends as yet. A demonstration of the anchoring effect was carried out by Kahneman and Tversky (1974).

In the proposed experiment the interviewed subjects were asked to identify the percentage of African countries in the United Nations, determined by previously running a wheel of fortune and drawing a number between 0 and 100. From the analysis of the answers given it appeared that the subjects had been influenced by the random number extracted from the wheel, as it turned out to be a point of reference for them. For example, the median estimates of the percentage of African countries in the United Nations for the groups that had received 10 and 65 as starting points, turned out to be, respectively, 25 and 45, confirming the fact that the individuals had been influenced by the number drawn randomly. For Kahneman and Tversky the anchorage does not occur only when the starting point is given by the subject, but also when the subject bases his estimate on the result of some incomplete calculation.

This effect was illustrated through a numerical estimation study. Two groups of high school students have estimated, within 5 seconds, a numerical expression written on the blackboard. The first group of students estimated the following product:

8x7x6x5x4x3x2x1

While the second group estimated the following product:

1x2x3x4x5x6x7x8

To respond quickly to these numerical expressions, the students carried out a few calculation steps and estimated the product by extrapolation or adaptation. Since adaptations are often insufficient, this procedure should lead to an underestimation of the final result. Moreover, since the result of the first multiplication passages (performed from left to right) is greater in the decreasing sequence than the growing one, the first expression should be judged to be greater than the second. Both hypotheses were confirmed, in fact the estimated median for the increasing sequence was 512, while for the decreasing sequence it was 2250. The correct answer is 402030.*Reference*

Kahneman D., Tversky A. (1974). Judgement under uncertainty: Heuristics and Biases. Science, 185(4157), 1124-1131.