The Investment Scientist

During the Oxford Reunion Week, we had the opportunity to audit classes with current students. I signed up for the Psychology, Economic Decisions and Financial Markets class. Today I am going to write about one important takeaway: saliency and how it shapes our decisions.

What is Saliency?

Saliency refers to the property of a stimulus that makes it stand out relative to its surroundings.  This captures an individual’s attention and makes it disproportionately influential in judgment and decision-making. Essentially, it is about how noticeable a feature or piece of information is to us.

Behavioral economics suggests that humans rely on mental shortcuts (heuristics) to make decisions. The Saliency Heuristic proposes that when evaluating options, people overemphasize characteristics or attributes that are highly salient, often neglecting less obvious but potentially more relevant information.

Bad Decisions Due To Saliency