This quiz works best with JavaScript enabled. Home > Finance Theory > Behavioral Finance > Behavioral Finance – Quiz 6 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Behavioral Finance Quiz 6 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. When mitigating status quo bias, A comparison on ..... analysis of increasing investments in existing product vs investing in new product will help. A) Technical. B) Fundamental. C) Portfolio. D) Cost benefit. Show Answer Correct Answer: D) Cost benefit. 2. Assume there is a mispricing. Why can arbitrageurs not immediately create such a strong buyng pressure that the price of the stock changes to its fundamentally fair value? Why of the following is a potential rationale? A) The mispricing is too strong to be eliminated. B) It is possible that the mispricing even amplifies. C) Arbitrageurs are not allowed to trade when there is a mispricing. D) None of above. Show Answer Correct Answer: B) It is possible that the mispricing even amplifies. 3. What is the clustering illusion in the context of behavioral finance? A) The belief that random events that occur in clusters are not really random. B) The reliance on instinct instead of analysis in making decisions. C) The reliance on stereotypes or limited samples to form opinions. D) The tendency to avoid making a decision because of fear of suboptimal outcomes. Show Answer Correct Answer: A) The belief that random events that occur in clusters are not really random. 4. In 2011, 15 people died from shark attacks, whereas roughly 150 people died from falling coconuts. However, you are probably more scared of shark attacks. Which bias is at work? A) Conjunction Fallacy. B) Availability Bias. C) Base Rate Neglect. D) Law of Small Numbers. Show Answer Correct Answer: B) Availability Bias. 5. Refers to unconscious association, belief, orattitude toward any social group. A) Confirmation Bias. B) Implicit / Unconscious Bias. Show Answer Correct Answer: B) Implicit / Unconscious Bias. 6. This value that drives financial behaviors focuses on how we see ourselves and how we believe others see us? A) Social. B) Financial. C) Inner. D) Physical. Show Answer Correct Answer: C) Inner. 7. Another aspect ofoverconfidence psychology. A) Timing Optimism. B) Over Ranking. Show Answer Correct Answer: A) Timing Optimism. 8. A short term goal is ..... A) One that requires no planning or effort. B) Not important. C) One that can be accomplished in a short amount of time/in the near future (day, week, month). D) None of above. Show Answer Correct Answer: C) One that can be accomplished in a short amount of time/in the near future (day, week, month). 9. What is overconfidence in the context of behavioral finance? A) Relying on instinct instead of analysis in making decisions. B) Taking an overly pessimistic view of potential outcomes. C) Belief that you can forecast the future with precision. D) Belief that your abilities are worse than they really are. Show Answer Correct Answer: C) Belief that you can forecast the future with precision. 10. Someone who buys goods/services for personal use A) Consumer. B) Social media power user/influencer. C) Choice. D) Status. Show Answer Correct Answer: A) Consumer. 11. When people are asked to assess the frequency of a class or the similarity of an event, they do so by the ease with which instances or occurrences can be brought to mind A) Probability. B) Similarity. C) Availability. D) None of above. Show Answer Correct Answer: C) Availability. 12. Prospect theory, loss aversion, and framing effect are key concepts associated with: A) Cognitive biases in behavioral finance. B) Modern portfolio theory. C) Efficient market hypothesis. D) None of above. Show Answer Correct Answer: A) Cognitive biases in behavioral finance. 13. Most common emotions that drive decision making are ..... A) Hope & fear. B) Greed & Fear. C) Greed & hope. D) Happy & sad. Show Answer Correct Answer: B) Greed & Fear. 14. Similarity heuristics is used to account for how people make judgments based on the ..... between current situations and other ..... or prototypes of those situations. A) Similarity solutions. B) Similarity problems. C) Probability situations. D) Similarity situations. Show Answer Correct Answer: D) Similarity situations. 15. Adam Smith in the book " Theory of Moral Sentiments" from 1776 emphasizes that people's actions are not completely driven by selfishness, but by another important motive. What is this motive? A) The Antisocial Personality Disorder. B) A desire for praiseworthiness. C) Selfishness. D) Cognitive dissonance. Show Answer Correct Answer: B) A desire for praiseworthiness. 16. Which is not the form of Market Efficiency as per EMH? A) Week Form of Efficiency. B) Semi Week Form of Efficiency. C) Semi Strong Form of Efficiency. D) Strong Form of Efficiency. Show Answer Correct Answer: B) Semi Week Form of Efficiency. 17. I will save up to buy a car with cash and not take out a car loan is an example of a: A) Commitment device. B) Opportunity cost. C) Money goal. D) Confirmation bias. Show Answer Correct Answer: C) Money goal. 18. Why do people keep money in banks, savings & loans, and credit unions? A) Laws require people to save part of their income. B) They have drive-through windows. C) Deposits at these institutions are safe and earn interest. D) None of above. Show Answer Correct Answer: C) Deposits at these institutions are safe and earn interest. 19. Choosing vs. Pricing:preferring one option, but being willing to pay more for the other, violates which axiom? A) Invariance. B) Independence. C) Dominance. D) None of above. Show Answer Correct Answer: A) Invariance. 20. It assumes the people that make decisions by gathering allrelevant data and possess the skills to process thisinformation in a rational, unemotional way to arrive at anoptimal choice. A) Traditional Finance. B) Behavioral Finance. Show Answer Correct Answer: A) Traditional Finance. ← PreviousNext →Related QuizzesFinance Theory QuizzesBehavioral Finance Quiz 1Behavioral Finance Quiz 2Behavioral Finance Quiz 3Behavioral Finance Quiz 4Behavioral Finance Quiz 5Behavioral Finance Quiz 7Behavioral Finance Quiz 8Behavioral Finance Quiz 9Behavioral Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books