QUIZ:Market psychology

What is behavioral finance?

• The study of market trends

• The analysis of financial statements

• The study of how psychological factors affect financial decisions

• The management of investment portfolios

Which concept explains the tendency to hold onto losing investments?

• Herd behavior

• Loss aversion

• Overconfidence

• Anchoring

What is the term for making investment decisions based on the behavior of others?

• Herding

• Mental accounting

• Framing

• Confirmation bias

Which bias occurs when investors overestimate their ability to predict future events?

• Overconfidence bias

• Hindsight bias

• Self-attribution bias

• Representative bias

What is the ‘disposition effect’?

• Preferring high-risk investments

• Selling winners too early and holding losers too long

• Diversifying investment portfolios

• Following market trends

What does ‘mental accounting’ refer to in behavioral finance?

• Treating money differently based on its source

• Keeping accurate financial records

• Using mental math for investment decisions

• Ignoring financial advice

What is ‘framing effect’?

• The impact of news on stock prices

• The influence of how information is presented on decision making

• Choosing investments based on past performance

• Diversifying investment portfolios

Which of the following is an example of ‘anchoring bias’?

• Following the majority

• Relying too heavily on the first piece of information encountered

• Ignoring market trends

• Overestimating personal knowledge

What does ‘loss aversion’ imply?

• Preference for guaranteed gains

• Fear of making investments

• Stronger reaction to losses than to gains

• Optimism about future investments

Which bias involves the tendency to search for or interpret information in a way that confirms one’s preconceptions?

• Confirmation bias

• Cognitive dissonance

• Anchoring bias

• Availability bias