Identification

Question 1

refers to the process by which people FIND THINGS OUT FOR THEMSELVES usually by trial and error

Answer 1

heuristics

Question 2

often leads people to develop “RULES OF THUMB”, but this process often leads to other errors.

Answer 2

Trial and error

Question 3

can also be defined as the “USE OF EXPERIENCE and PRACTICAL EFFORTS to answer questions or to improve performance”.

Answer 3

Heuristics

Question 4

is still a classic description of the main heuristics that PEOPLE USE TO JUDGE probability and frequency

Answer 4

Kahneman and Tversky

Question 5

MAKING ESTIMATES by starting from an initial value that is then adjusted TO GET THE FINAL ANSWER. The adjustment is usually insufficient.

Answer 5

Anchoring Heuristic

Question 6

JUDGING THE PROBABILITY OF AN EVENT or the frequency of a class based on the ease with which occurrences or instances CAN BE BROUGHT TO MIND.

Answer 6

Availability Heuristic

Question 7

PROBABILITIES ARE EVALUATED by the degree to which A is representative of B – by the degree to which A resembles B.

Answer 7

Representativeness Heuristic

Question 8

If SOMETHING IS HAPPENING more frequently then it is less likely to happen in the NEAR FUTURE.

Answer 8

Gambler’s Fallacy

Question 9

People prefer INDIVIDUATING or SPECIFIC INFORMATION over general ones when the former is available.

Answer 9

Base Rate Fallacy

Question 10

People are most likely to TAKE ACTION when variance is at ITS PEAK. Then after results become more normal they believe that their action was the cause of the change when in fact it was not causal.

Answer 10

Regression to the mean

Question 11

The EXTRA SPECIFICITIES pave the way for assessing the integrity of SOMEONES
‘S CLAIM.

Answer 11

Conjunction FallacyConjunction Fallacy

Question 12

According to him, Representative heuristic is a JUDGMENT BASED ON STEREOTYPES.

Answer 12

Shefrin

Question 13

refers to the TENDENCY TO FORM judgment based on stereotypes

Answer 13

Representativeness

Question 14

is a tendency to HOLD A FALSE and MISLEADING assessment of
our skills, intellect, or talent.

Answer 14

Overconfidence bias

Question 15

Is a PERFECTLY SENSIBLE coping strategy for life but can be problematic when investing

Answer 15

Optimism

Question 16

is the tendency for people TO BELIEVE THAT THE ACCURACY of their forecasts necessarily increases with more information.

Answer 16

The illusion of knowledge

Question 17

is the TENDENCY TO OVERESTIMATE our ability to influence events over which we HAVE LITTLE CONTROL

Answer 17

The illusion of control

Question 18

CAN FEED CONFIDENCE LEVELS further. By extrapolating recent experience into the future, investors are often guilty of making confident predictions that are regularly shown to be flawed

Answer 18

Hindsight bias

Question 19

refer to TWO OPPOSING EMOTIONAL STATES THEORIZED as factors causing the unpredictability and volatility of the stock market, and irrational market behavior inconsistent with the efficient-market hypothesis

Answer 19

Greed and fear

Question 20

is usually described as an IRRESISTIBLE CRAVING to possess more of something
(money, material goods) than one actually needs

Answer 20

Greed

Question 21

is usually characterized CHARACTERIZED AS AN INCONVENIENT, stressful state,
triggered by impending peril and awareness of hazard

Answer 21

Fear