Behavioural Science

Which of the following best describes cognitive dissonance?

• The tendency to stick with the status quo despite new evidence.

• The discomfort experienced when holding conflicting beliefs or receiving contradictory information.

  
  

• The tendency to overestimate one's own skills and knowledge.

• The bias towards seeking information that confirms existing beliefs.

  
  

What is an example of conservatism bias in investing?

•  Selling a stock after it significantly drops in price due to fear of further losses.

  
  

•  Ignoring new market trends and maintaining old investment forecasts despite new data.

  
  

• Following a popular investment recommendation without research.

  
  

• Diversifying investments to reduce risk based on recent performance.

  
  

Which bias is demonstrated when an investor only pays attention to news that supports their pre-existing views?

• Confirmation Bias

  
  

• Availability Bias

  
  

•  Self-Control Bias

  
  

•  Status Quo Bias

  
  

Representativeness bias can lead to which of the following errors?

•  Overreacting to recent data due to an overemphasis on its significance.

  
  

•  Relying too much on the similarity of an investment to a well-known category without considering its unique risks.

  
  

• Misinterpreting historical data as irrelevant due to recent changes.

  
  

• Ignoring well-established financial models in favor of recent trends.

  
  

How does the illusion of control bias affect investment decisions?

•  It leads investors to believe they can influence market outcomes through their actions.

  
  

• It makes investors more cautious about taking any action due to fear of making mistakes.

• It causes investors to overly rely on recent performance data

•  It leads investors to avoid any risky investments to prevent potential regret.

  
  

What is a common effect of hindsight bias on investors?

•  Overconfidence in their ability to predict future market movements.

  
  

• Difficulty in recalling past market trends.

  
  

• Excessive caution in making investment decisions.

  
  

• Misjudging the ease of recalling past predictions versus actual outcomes.

  
  

In the context of mental accounting bias, which of the following is most likely?

• Investing a bonus in a high-risk stock while keeping other investments conservative.

  
  

• Treating all investments the same regardless of their source or purpose.

  
  

•  Diversifying investments equally across all available assets.

  
  

•  Adjusting investment strategies based solely on historical performance.

  
  

What is the primary reason behind herding behavior in financial markets?

• A desire to be different from the majority.

  
  

• The tendency to follow others to avoid personal responsibility if things go wrong.

  
  

• The intention to make independent investment decisions.

  
  

• A belief in one's superior market knowledge compared to others.

  
  

Which bias leads an investor to avoid changing their current investment portfolio despite new information?

•  Endowment Bias

  
  

•  Status Quo Bias

  
  

• Regret Aversion Bias

  
  

• Overconfidence Bias

  
  

In the Dot-Com Bubble, which bias led investors to hold on to tech stocks despite signs of a market correction?

• Loss Aversion Bias

  
  

• Self-Control Bias

  
  

•  Regret Aversion Bias

  
  

•  Endowment Bias