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5 Written Questions: No Answer Given
5 Written Questions: No Answer Given
5 Written Questions: No Answer Given
NAME
5 Written questions
1. behavioral finance tries to explain observed investor decision making, which is clearly not fully explained by traditional finance
0
INCORRECT
No answer given
THE ANSWER
descriptive
INCORRECT
No answer given
THE ANSWER
no free lunch
INCORRECT
No answer given
THE ANSWER
4. selling winners too soon and holding onto losers too long
INCORRECT
No answer given
THE ANSWER
disposition effect
INCORRECT
No answer given
THE ANSWER
5 Matching questions
1. the price is right A. individuals estimate future probabilities by how easily they recall a past
event, four causes:
INCORRECT
1. retrievability - how easily a memory is recalled
No answer given
2. categorization - prior experiences and classifications
THE ANSWER
3. narrow range of experience - limited experience means narrow focus
D. - suggests that asset prices reflect all available information and adjust
4. resonance - individuals tend to estimate others' likes and dislikes using
instantaneously to fully and accurately incorporate the value of new
their own
information
- information here is defined as all current information as well as the
B. - prediction overconfidence: leads to underestimating risk and setting
unbiased interpretation of expected information
confidence intervals too narrow
- certainty overconfidence: relates to over-stated probabilities of
success
C. - because they put goals and related assets into mental accounts,
investors' portfolios tend to resemble layered pyramids of assets
- investors ignore the correlations of assets
https://quizlet.com/8816732/test 1/4
12/7/2020 Test: CFA III - SS3 - The Behavioral Finance Perspective | Quizlet
2. overconfidence bias D. - suggests that asset prices reflect all available information and adjust
instantaneously to fully and accurately incorporate the value of new
INCORRECT
information
No answer given
- information here is defined as all current information as well as the
THE ANSWER
unbiased interpretation of expected information
B. - prediction overconfidence: leads to underestimating risk and setting
confidence intervals too narrow
E. identifies four behavioral investor types. Go through a four step process
- certainty overconfidence: relates to over-stated probabilities of success
to determine the investors BIT:
1. interview to determine if active or passive
3. mental accounting bias
2. plot on a risk tolerance scale
INCORRECT
3. test for behavioral biases
No answer given 4. classify the investor into one of the BITs
THE ANSWER
C. - because they put goals and related assets into mental accounts,
investors' portfolios tend to resemble layered pyramids of assets
- investors ignore the correlations of assets
INCORRECT
No answer given
THE ANSWER
5. availability bias
INCORRECT
No answer given
THE ANSWER
1. rules of thumb
B. heuristics
C. prescriptive
D. self-calibration
2. - current income
- currently owned assets
- present value of future income
D. bounded rationality
https://quizlet.com/8816732/test 2/4
12/7/2020 Test: CFA III - SS3 - The Behavioral Finance Perspective | Quizlet
3. investors focus on one factor or outcome while consciously eliminating or subconsciously ignoring others
A. isolation effect
B. evaluation phase
C. self-calibration
D. AMH conclusions
A. endowment bias
B. evaluation phase
C. disposition effect
D. self-calibration
A. availability bias
5 True/False questions
INCORRECT
True
THE ANSWER
False
It should be → behavioral asset pricing
INCORRECT
False
THE ANSWER
True
INCORRECT
False
THE ANSWER
True
https://quizlet.com/8816732/test 3/4
12/7/2020 Test: CFA III - SS3 - The Behavioral Finance Perspective | Quizlet
4. - passive investor with low to moderate risk tolerance
- suffers mainly from cognitive errors
- wants to be in the most popular investments
- use quantitative methods to educate → Pompian BIT: active accumulator
INCORRECT
True
THE ANSWER
False
It should be → Pompian BIT: friendly follower
INCORRECT
True
THE ANSWER
False
It should be → conservatism bias
https://quizlet.com/8816732/test 4/4