Course: Behavioral Finance Understanding Your BiasesQuestion:Give an example where you (past...

Question

Course: Behavioral Finance
Understanding Your Biases
Question:
Give an example where you (past investments, past or cu
ent thoughts on the market, etc.) or recent article (footnote) exhibited the biases highlighted.
Submit as 15 Short Answers with each bias (9 Cognitive & 6 Emotional) labeled.
Cognitive Bias (9)
Conservatism, Confirmation, Representativeness, Illusion of control, Hindsight, Anchoring and adjustment, Mental accounting, Framing, Availability
Emotional Bias (6)
Loss aversion, Overconfidence, Self-control, Status quo, Endowment, Regret aversion

Grade Ru
ic:
· Outstanding including what the bias means to you and how your detailed example exhibits the bias > 90
· Good Work in general - expected MS work (but under-developed written answers or inco
ect examples) scored XXXXXXXXXX
· Satisfactory but with significant shortcomings (would include underdeveloped written answers) < 80
· Include your references and bibliography

assignment-2-behavioral-finance-n112o3dp.docx

Kushal · Accepted Answer

Behavioral Finance and Biases 
During my period of excessive trading, I was able to come across a lot of behavioral biases. Following are the instances where it happened. 
1. Conservatism - This bias happens when we tend to take the conservative approach during the investment or trading. Even though It was returns sure shot about the downfall of a given stock I kept my volume size really low in order to make sure that I do not encounter losses. Due to this, my profits for a given trade were low which could have been much more. 
2. Confirmation bias - This bias happens when we tend to confirm our preconceived notions and find conclusive evidence for the sake of confirmation. We tend to ignore a whole lot of information which should have been looked at before investing. During a recent IPO offer Uber, because of the lot of hype I ended up buying the shares only to realise that valuation was overvalued.
3. Representativeness - This bias happens when you identify one firm or a stock to be representative of all the stocks or the whole portfolio or market. Hence, whatever the first stock or a company comes to your mind, you tend to invest in that rather than analyzing other companies. For example, I wanted to invest in one of the oil and petroleum companies. Since I own a credit card powered by one for the firms,  I ended up investing in that firm. 
4. Illusion of control - This bias occurs when you own a particular stock or company and you think since you own this,

Course: Behavioral Finance Understanding Your Biases Question: Give an example where you (past investments, past or current thoughts on the market, etc.) or recent article (footnote) exhibited the...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment