Welcome to the Financial Times Lexicon

Browse thousands of words and phrases selected by Financial Times editors and suggest new terms for the glossary.

 

Term of the day

availability heuristic

The availability heuristic is a term coined by academics Daniel Kahneman and Amos Tversky who observed that people tend to rely on readily available recent knowledge rather than exploring other probabilities when making decisions. The "cognitive illusion" this creates causes havoc for investors. It means we repeatedly fail to anticipate financial disasters – such as the dotcom collapse of 2000 or the US housing market – because at the time they were unfamiliar events. It also means that once the...