What is referred to when prior beliefs are weakened by contradictory information?

When prior beliefs are weakened by contradictory information, this phenomenon is known as Belief Inertia. It describes the psychological resistance individuals have to changing their established beliefs, even when presented with new evidence that contradicts those beliefs. Despite receiving new information that should lead to a reconsideration of their viewpoints, individuals often struggle to adjust their beliefs, which can lead to cognitive dissonance.

Belief Inertia emphasizes how deeply held opinions can create a barrier to integrating new data, highlighting the conflict between existing beliefs and new insights. This resistance can manifest in various domains, including behavioral finance, where traders might stick to flawed investment theses despite receiving market data that suggests a different conclusion. Recognizing Belief Inertia is essential for analysts and traders, as it helps explain why market participants may fail to act rationally.

The other options do not accurately capture this concept: Crime of small numbers refers to statistical anomalies, the DHS Hypothesis pertains to decision-making frameworks, and a negative feedback loop is related to systems theory and how systems self-regulate. Thus, Belief Inertia is specifically aligned with the psychological mechanism at play regarding the dichotomy between established beliefs and contradictory evidence.