By
Borsgade
As part of Morgan Stanley Investment Management, Michael Mauboussin has published an article that goes into depth with the concept of “Pattern Recognition”. In Danish, this can best be described as ‘pattern recognition’.
In the article, they discuss the potential and dangers of pattern recognition, which many investors often cite as the basis for their actions. Mauboussin writes that while it can be an effective tool when used correctly, it can also be misleading and lead to overconfidence.
They discuss when it tends to work well, why it can be misleading, and offer ways to help improve it.
Pattern recognition tends to work well in stable environments where cause and effect are clear and feedback is effective but poorly where causality and feedback are limited.
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