I am reading ‘Predictably Irrational’ .
I have heard many of his talks so I already have some good idea what his book is about. But it still makes a very interesting read.
First couple of chapters are about price anchoring.
I suppose we can use it as a socio-psychological groundwork to explain why we have frequent financial crises.
Each financial crisis involves different markets and instruments. Each of them has unique background, fundamentals and built-up. However, it always take a crisis-scale event for the underlying structural problem to be exposed and unwind itself. A crisis serves as a publicised event to readjust everyone’s anchoring of the value and returns of the financial assets that are under distress.