Do you think these examples paint a misleading or unfair picture of financial market predictions? Why or why not?

No because these predictions were made mostly by the people in the financial market. The predictions these people made were exactly opposite of what happened. Prediction is a statement about the way things will happen in the future. Sometimes, predictions are right sometimes they are wrong. In this case all the predictions were wrong. For example, in 2008, Bijan Moazami, analyst at AIG stated, AIG could have huge gain in the second quarter (Robbins & Judge, 2011, p. 196). But, what happened was exactly the opposite. Between 2008 and 2009, AIG lost $5 billion that quarter, $25 billion next, and $62 billion the quarter after that, before being given a $90 billion credit by the U.S. government (Robbins & Judge, 2011, p. 196). Because predictions are statements about the way things will happen in the future. A manager should not rely on it. No one knows what will happen in the future. In business it is really hard to predict even if you have information and numbers on what will mostly likely happen because of external factors. For example, people who invest millions in the stocks right before September 11 lost millions because who knew there would be planes flying into buildings? There are several reasons why analysts are reluctant to put sell ratings on stocks, one is selective perception (Robbins & Judge, 2011, p. 163). People who rely on their prediction take risk. Managers should use risk management when making predictions. Risk management is a discipline for identifying risks, assessing how serious or severe the risks are, and determining ways to address that uncertain future with a goal of avoiding or minimizing harm and financial losses (Risser, 2011). Robbins, S.P. & Judge, T.A. (2011). Organizational behavior. Saddle River, NJ: Prentice Hall. Joe Risser, (2011). Risk and risk management. Retrieved from http://www.nonprofitrisk.org/advice/faqs/risk-management2.shtml What perceptual or decision-making errors can you identify in these predictions? Perception is a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment (Robbins & Judge, 2011, p. 168). The perceptual errors in these predictions are the external factors. Most of these predictions made were during the recession when the economy was in a very bad condition. These are the selective perception, which is the tendency to selectively interpret what on sees on the basis of ones interests, background, experience, and attitudes (Robbins & Judge, 2011, p. 163). For example, when prices are going down, analysts often attend to the past saying the stock is a bargain relative to tis prior price, rather than the future the downward trend may well continue (Robbins & Judge, 2011, p. 173). These decisions were made by past experiences. There are several decision-making errors in these predictions. The common biases and errors in decision making are overconfidence bias, anchoring bias, confirmations bias,

availability bias, and escalation of commitment (Robbins & Judge, 2011, p. 180). Some of these predictions are availability bias because the people who predicted these predictions dont have enough information to predict. People tent to overestimate for example, when people say theyre 65 to 70 percent confident theyre right, they are actually correct only about 50 percent of the time (Robbins & Judge, 2011, p. 179). Most of these predictions were made without much information and have been over estimated. Robbins, S.P. & Judge, T.A. (2011). Organizational behavior. Saddle River, NJ: Prentice Hall. Why do we like making predictions so much? People like making predictions for many reasons. People sometimes make predictions to see if it comes true or they plan to base on their prediction. People make predictions by relying too heavily on experience, impulse, gut feelings, and convenient rules of thumb (Robbins & Judge, 2011, p. 179). Making prediction is not easy especially in business. As we can we can these smart analyst made predictions that cost billions of dollar. When mangers make decision they should be very careful because there are a lot of risk. However, we all like making prediction. I usually like making predictions in my favor. When you predict something and it happens it feels really good. When people in top positions such as managers, presidents, and congress make decision that can affect a lot of people and risk billions of dollars. For example when, some of the presidential candidates have voted on some bills that have came back and hunted them because they predicted other wise. People like making predictions because they want to see if it will come true and people make predictions so they can plan for the future. People making predictions are not accurate because people tend to use selective perception. Why do you think predictions seem so hard to make? Prediction is hard because no one knows what will happen in the future. If people were able to predict then they would invest all their money into stock and be millionaires. When people say they are 100 percent sure, they tend to be 70 to 85 percent correct (Robbins & Judge, 2011, p. 179). When people make predictions they tend to over estimate. When we make predictions even based on information, the results can be a lot different because of external factors. For example, if you tell a friend you go to his house in 15 minutes. You already know how long it takes to get to his house and you even use gps to get there, but what if you get into an accident or you get pulled over by a cop. It will take you a lot more than 15 minutes. We all like to predict but it is not easy to predict. When people make predictions they take risks. Robbins, S.P. & Judge, T.A. (2011). Organizational behavior. Saddle River, NJ: Prentice Hall.