Final-Investment Management Review Quiz Number 1

It assumes the people that make decisions by gathering all

relevant data and possess the skills to process this

information in a rational, unemotional way to arrive at an

optimal choice.

• Traditional Finance

• Behavioral Finance

Is the study of the influence of psychology on the

behavior of investors or financial analysts. It also includes the

subsequent effects on the markets. It focuses on the fact that

investors are not always rational, have limits to their self-control, and

are influenced by their own biases.

• Behavioral Finance

• Traditional Finance

It relies on

mathematical calculations, economic models and regressions

not by their emotional interest.

• Behavioral Finance

• Traditional Finance

It depends on how humans actually behaves, it argues

that it is human are irrational and the decisions they are

making are influenced by their emotions and biases. It

combines the effect of finance and psychology.

• Behavioral Finance

• Traditional Finance

Explains that people are irrational and our own emotions

and bias have a role to play when making investment

decisions.

• Traditional Finance

• Behavioral Finance

Which of the following is confirmation bias in the context of investment decisions?

• Making decisions based on new information

• Seeking information that confirms pre-existing beliefs

• Ignoring relevant data

• Considering both positive and negative information equally

Which psychological bias is characterized by the tendency to prefer avoiding losses rather than acquiring equivalent gains?

• Overconfidence bias

• Loss aversion

• Anchoring bias

• Hindsight bias

When investors rely too heavily on the first piece of information encountered when making decisions, it is known as: a. b. c. d.

• Overconfidence bias

• Anchoring bias

• Recency bias

• Hindsight bias

Investors who overestimate their abilities and underestimate the risks involved in investment decisions are exhibiting:

• Confirmation bias

• Hindsight bias

• Overconfidence bias

• Anchoring bias

What is recency bias in investment decision-making?

• Giving more weight to recent events than past events

• Ignoring recent market trends

• Focusing only on historical data

• Disregarding current market conditions