Behavioural Finance

Question 1

Types of perseverance biases 6

Answer 1

• conservatism
• confirmation
• cognitive dissonance
• hindsight
• illusion of control
• representativeness

Question 2

Types of Information processing biases 6

Answer 2

• Anchoring and adjustment
• Availability/ familiarity/ frequency/ saliency/ recency
• Framing
• Self-attribution
• Sunk-cost
• Outcome

Question 3

Types of Emotional biases 8

Answer 3

• Affinity
• Disposition
• Endowment
• Loss aversion
• Overconfidence
• Regret aversion
• Self-control
• Status quo

Question 4

Conservatism bias

Answer 4

the tendency to revise one’s belief insufficiently when presented with new evidence

Question 5

Confirmation bias

Answer 5

the tendency to interpret information in a way that confirms one preconceptions

Question 6

Cognitive dissonance

Answer 6

tendency to experience stress or discomfort when holding two or more contradictory ideas, beliefs or values at the same time, or when performing an action contradictory to one’s ideas, beliefs or values, or when confronted by new information that contradicts existing ideas, beliefs or values

Question 7

Hindsight bias

Answer 7

the belief that past events were predictable at the time they occurred

Question 8

Illusion of control

Answer 8

the overestimation of one’s control over external events

Question 9

Representativeness bias

Answer 9

the tendency to classify things based on a few characteristics without accounting for the base rates of those characteristics

Question 10

Anchoring and adjustment

Answer 10

the tendency to rely heavily on one piece of information when making a decision

Question 11

Availability / familiarity / frequency / saliency / recency bias

Answer 11

the tendency to overestimate the likelihood of events that are more easily recalled given the recency with which they occurred or the emotional charge they hold

Question 12

Framing bias

Answer 12

the tendency to draw different conclusions from different presentations of the same information

Question 13

Self-attribution bias

Answer 13

the tendency to claim more responsibility for successes than failures

Question 14

Sunk-cost bias

Answer 14

the decision to invest or spend money, time, effort, etc. despite new evidence that shows that the expected cost of doing so exceeds the expected benefits

Question 15

Outcome bias

Answer 15

the tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made

Question 16

Affinity bias

Answer 16

the tendency to be drawn to those people, things or decisions that one views as being similar to themselves

Question 17

Disposition bias

Answer 17

the tendency to sell an asset that has accumulated in value and resist selling an asset that has declined in value

Question 18

Endowment bias

Answer 18

the tendency to overvalue an object because they possess it

Question 19

Loss aversion bias

Answer 19

the tendency to view losses as more painful than similar amounts of gains

Question 20

Overconfidence bias

Answer 20

the tendency to be overly sure of oneself and their ideas

Question 21

Regret aversion bias

Answer 21

the tendency to avoid making decisions for fear of experiencing regret

Question 22

Self-control bias

Answer 22

the tendency to choose those actions that provide gratification in the short-term over the long-term

Question 23

Status quo bias

Answer 23

the tendency to choose to maintain the current situation

Question 24

Factors that impact biases

Answer 24

Culture
Religious and spiritual beliefs
Gender
Biology
Learned behaviour

Question 25

Availability heuristic

Answer 25

based on recently acquired information

Question 26

Representativeness heuristic

Answer 26

conclusion based on similar traits or industry

Question 27

Anchoring and adjustment heuristic

Answer 27

anchoring to a specific piece of information and adjusting expectations