Behavioral Finance
Anchoring
Why does an old share price feel like a fair value?
Anchoring gives an initial number more influence than the evidence warrants.
Compare a fresh estimate with the quoted reference point.
₹100 and ₹60 are historical and current prices. The ₹45 estimate comes from a separate cash-flow forecast. Compare the model with the prices only after writing down its assumptions.
A stock fell from ₹100 to ₹60. Revised cash flows imply ₹45 under your assumptions.
₹100 and ₹60 are historical and current prices. The ₹45 estimate comes from a separate cash-flow forecast. Compare the model with the prices only after writing down its assumptions.
Which action best addresses anchoring?