Advisor Insights

Why Outcomes and Processes Must Go Hand in Hand

Michael Pompian

This is the 13th article in the Behavioral Finance and Macroeconomics series exploring the effect behavior has on markets and the economy as a whole and how advisors who understand this relationship can work more effectively with their clients.

Outcome bias, an information processing bias, refers to the tendency of individuals to decide to take a course of action based on the outcome of past events, rather than by observing the process by which the outcome came about in order to make a decision.