Psychological and Behavioral Biases Quiz
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Questions and Answers

What are the two categories that investing biases can be categorized into?

  • Judgmental Bias and Decisional Bias
  • Cognitive Bias and Emotional Bias (correct)
  • Logical Bias and Emotional Bias
  • Behavioral Bias and Psychological Bias
  • Which bias refers to the tendency of people to stick to their current situation or decision?

  • Endowment Bias
  • Overconfidence
  • Loss Aversion
  • Status Quo Bias (correct)
  • What type of biases are generally easier to mitigate or eliminate?

  • Cognitive Errors (correct)
  • Judgmental Biases
  • Decisional Errors
  • Emotional Biases
  • Which bias involves people valuing something more when they own it?

    <p>Endowment Bias</p> Signup and view all the answers

    Which type of judgment is influenced by impulse, intuition, and feelings rather than facts?

    <p>Emotional Judgment</p> Signup and view all the answers

    Which bias involves making decisions based on how the information is presented rather than on the actual information itself?

    <p>Anchoring &amp; Adjustment</p> Signup and view all the answers

    What is the primary coping mechanism people use in high-controlled situations?

    <p>Inevitability</p> Signup and view all the answers

    How can investors mitigate hindsight bias according to the text?

    <p>Remind oneself of the cyclical nature of markets</p> Signup and view all the answers

    What is the principle that states our choices are influenced by the way things are presented?

    <p>Framing Bias</p> Signup and view all the answers

    In what framing do people tend to be risk-averse according to the text?

    <p>Gain framing</p> Signup and view all the answers

    What is a common outcome of excessive hindsight bias in investors?

    <p>Overconfidence</p> Signup and view all the answers

    What belief may lead to over-criticizing the performance of others?

    <p>Believing predictions were more accurate than they actually were</p> Signup and view all the answers

    What bias is Emong exhibiting in his investment decisions?

    <p>Confirmation Bias</p> Signup and view all the answers

    What does Emong do instead of reading the entries and notes in the company's Balance Sheet?

    <p>Listens to his Guru's technical analysis on Facebook</p> Signup and view all the answers

    What is one way to overcome confirmation bias according to the text?

    <p>Actively seek and consider information that contradicts your opinion</p> Signup and view all the answers

    Which bias term was first coined by Ellen Langer in her 1975 paper?

    <p>Illusion of Control Bias</p> Signup and view all the answers

    What makes Emong overconfident in his investment decisions?

    <p>Confirmation Bias</p> Signup and view all the answers

    What should Emong make use of according to the text to have a more comprehensive analysis?

    <p>Both fundamental and technical analysis</p> Signup and view all the answers

    What does overconfidence entail?

    <p>Thinking you know more than you do</p> Signup and view all the answers

    Which bias causes people to prioritize short-term desires over long-term goals?

    <p>Self-Control Bias</p> Signup and view all the answers

    What is an example of self-control bias mentioned in the text?

    <p>Spending too high a percentage of income</p> Signup and view all the answers

    What does Endowment Bias refer to?

    <p>Considering owned assets more valuable than others</p> Signup and view all the answers

    Which behavioral economist coined the term 'Endowment Bias'?

    <p>Richard Thaler</p> Signup and view all the answers

    What is another name for Endowment Bias as mentioned in the text?

    <p>&quot;Divestiture Aversion&quot;</p> Signup and view all the answers

    What does the 'Anchoring Effect' caution against when making purchasing decisions?

    <p>Basing decisions on offered discounts without knowing the regular price</p> Signup and view all the answers

    What is the common term used for the mental bias of dividing money into separate categories based on subjective criteria?

    <p>Two-Pocket Theory</p> Signup and view all the answers

    Why is the mental accounting bias considered a 'fungibility violation'?

    <p>Because it categorizes money based on subjective criteria</p> Signup and view all the answers

    How does separating accounts based on different goals influence spending decisions according to the text?

    <p>It manipulates decisions positively despite money being fungible</p> Signup and view all the answers

    What cognitive limitation justifies the practice of mental accounting according to the text?

    <p>Brain's incapacity to systematically compare opportunity costs</p> Signup and view all the answers

    Why do marketers advise against solely considering discounts when making purchasing decisions?

    <p>Because discounts may not reflect true savings if regular prices aren't known</p> Signup and view all the answers

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