Confusion between perception and reality in the markets is “making the lives of economists fairly miserable”, says Paul Donovan, UBS’s global chief economist.

Speaking at the firm’s roundtable forum in London, he explained that there are two general problems in the financial markets: precision bias and frequency bias. 

Precision bias refers to people believing the numbers shown to them are accurate, while frequency bias refers to people obsessing about figures they get frequently, while paying less attention to those that come out less often. Both of these can result in individuals having a different percep...