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finmane2 > intro beh. finance > Flashcards

intro beh. finance Flashcards

1
Q

Behavioral finance tries to understand how people forget fundamentals and make investments based on emotions.

A

Verma

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2
Q

Behavioral finance as behavioral economics and is further defined as combining the twin discipline of psychology and economics to explain why and how people make seemingly irrational or illogical decisions and why they save, invest, spend and borrow money

A

Belsky and Gilowich

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3
Q

stated “People in Traditional Finance are rational. People in Behavioral Finance are normal.”

A

Mier Statman

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4
Q

Examines behaviors or biases of individual investors that distinguish them from the rational actors envisioned in classical economic theory.

A

Behavioral Finance Micro

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5
Q

behavioral finance is the study of the influence of psychology on the behavior of financial practitioners and the subsequent effect on markets.

A

Swell

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6
Q

2 CATEGORIES OF IRRATIONALITES

A

1 Investors do not always process information correctly.
# 2 Even when given a probability distribution of returns, investors may make inconsistent or suboptimal decisions.

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7
Q

Detects and describe anomalies in the efficient market hypothesis that behavioral models may explain.

A

Behavioral Finance Macro

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8
Q

Father of MODERN BEHAVIORAL FINANCE

A

Dr. Daniel Kahneman and Dr. Amos Tversky

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9
Q

Dr. Daniel Kahneman and Dr. Amos Tversky they are known as?

A

The Brilliant Pair

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10
Q

Dr. Daniel Kahneman and Dr. Amos Tversky they make a theory entitled?

A

Prospect Theory

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11
Q

PSYCHOGRAPHIC MODELS USED IN BEHAVIORAL FINANCE

A

BARNEWALL TWO-WAY MODEL
BB & K FIVE WAY MODEL

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12
Q

What is the BITs of Aggressive?

A

Active Accumulator

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13
Q

One of the oldest and most prevalent psychographic investor models

A

Barnewall two way model

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14
Q

Barnewall two way model is based on the work of?

A

Marilyn Macgruder Barnewall

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15
Q

Barnewall distinguished between two relatively simple investor types:

A

Active and Passive Investors

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16
Q

What is BITs

A

Behavioral Investor Types

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17
Q

What is the Bias types of Conservative?

A

Primarily Emotional

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18
Q

What is the BITs of Moderate?

A

Friendly Follower

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19
Q

What is the Bias types of Moderate?

A

Primarily Cognitive

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19
Q

What is the Bias types of Growth?

A

Primarily Cognitive

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20
Q

What is the Bias types of Aggressive?

A

Primarily Emotional

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21
Q

What is the BITs of Conservative?

A

Passive Preserver

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22
Q

What is the BITs of Growth?

A

Independent Individualist

23
Q

Inherit the money, not earned

A

Passive Preserver

24
Q
  • Do not have their ideas about investing
  • They follow the lead of their friends
  • education on the benefits of portfolio diversification
A

Friendly Follower

25
Q
  • “trust their gut”
A

Independent Individualist

26
Q

“The Most Aggressive”

A

Active Accumulator

27
Q

Although they are busy people, still they will reject financial Advice

A

Independent Individualist

28
Q
  • Strong willed and confident
A

Active Accumulator

29
Q
  • Careful not to take excessive risk
A

Passive Preserver

30
Q

one in which an investor receives shares of a company directly from the stock market.

A

Direct Equity Investment

31
Q

pool money from investors and invest in securities or other types of investments with the goal of getting positive returns.

A

Hedge Funds

31
Q

a mutual fund scheme that invests predominantly in equity stocks.

A

Equity Funds

32
Q

financial contracts, and their value is determined by the value of an underlying asset or set of assets.

A

Derrivatives

32
Q

It is defined as the land and any permanent structures, like a home, or improvements attached to the land, whether natural or man-made.

A

Real Estate

32
Q

a fixed-income investment that represents a loan made by an investor to a borrower, usually corporate or governmental.

A

Bonds

33
Q

pools of savings accumulated during the working life of individuals.

A

Pension Funds

34
Q

a yellow metallic element that occurs naturally in pure form and is used especially in coins, jewelry.

A

Gold

35
Q

People who are willing to put it all on one bet and go for it because they have confidence.

A

Adventurer

35
Q

They are difficult to advise because they have their own ideas about investing.

A

Adventurer

35
Q

These people like to be where the action is.

A

Celebrity

35
Q

They really do not have their own ideas about investments.

A

Celebrity

35
Q

They are willing to take risks, and they are volatile clients from an investment counsel point of view.

A

Adventurer

36
Q

they are the best prey for maximum broker turnover.

A

Celebrity

37
Q

people tend to go their own way and are typified by the small business person or an independent professional, such as a lawyer, CPA, or engineer.

A

Individualist

38
Q

These are clients whom everyone is looking for—rational investors with whom the portfolio manager can talk sense.

A

Individualist

39
Q

Typically, as people get older and begin considering retirement, they approach this personality profile.

A

Guardian

40
Q

They recognize that they face a limited earning time span and have to preserve their assets.

A

Guardian

41
Q

These people are so well balanced, they cannot be placed in any specific quadrant, so they fall near the center.

A

Straight Arrow

42
Q

What are the investment type under Adventurer?

A
  • Direct Equity Investments
  • Equity Funds
  • Hedge Funds
43
Q

What are the investment type under celebrity?

A

Direct equity
Bonds
Equity Funds

44
Q

What are the investment type under Guardian?

A

Pension funds
gold
bonds

45
Q

What are the investment type under Individualist?

A

direct equity investment
real state
derrivatives

46
Q

What are the investment type under straight arrow?

A

all investment including equity, bonds and gold

47
Q

Father of economics?

A

Adam Smith

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