This quiz works best with JavaScript enabled. Home > Finance Theory > Behavioral Finance > Behavioral Finance – Quiz 8 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Behavioral Finance Quiz 8 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. A man trades more frequently than a woman because of? A) Regret avoidance. B) Over confidence. C) Conservatism. D) None of the above. Show Answer Correct Answer: B) Over confidence. 2. What is given up in order to get something else A) Commitment device. B) Confirmation bias. C) Influence. D) Opportunity cost. Show Answer Correct Answer: D) Opportunity cost. 3. Choose your preferred gamble, C or D: A) C:$ 4, 000 w. p. 20% or $ 0 w.p. 80%. B) D:$ 3, 000 w.p. 25% or $ 0 w.p. 75%. Show Answer Correct Answer: B) D:$ 3, 000 w.p. 25% or $ 0 w.p. 75%. 4. This advice is apt for which behavior/ bias:' Make the client realize that there is nothing like Good Luck or Bad Luck' A) Regret aversion. B) Escalation of commitment. C) Gambler's Fallacy. D) Mental accounting. Show Answer Correct Answer: C) Gambler's Fallacy. 5. What is "savings" ? A) The amount taken off because of special deals. B) Disposable income minus consumption spending. Show Answer Correct Answer: B) Disposable income minus consumption spending. 6. It is the opposite of common sense and clear, measured judgement. It can lead to missed opportunities and poor decision making. A) Psychological Bias. B) Overconfidence BIas. Show Answer Correct Answer: A) Psychological Bias. 7. For something to have value, it must A) Cost a lot of money. B) Be on sale. C) Have utility. D) Never go out of style. Show Answer Correct Answer: C) Have utility. 8. Prospect theory A) People treat money differently, depending on factors such as the money's origin and intended use, rather than thinking of it in terms of the "bottom line" as in formal accounting. B) Is a behavioral model that shows how people decide between alternatives that involve risk and uncertainty (e.g. % likelihood of gains or losses). C) When people are asked to judge the probability that an object or event A belongs to class or process B, probabilities are evaluated by the degree to which A is representative of B, that is, by the degree to which A resembles B. D) None of above. Show Answer Correct Answer: B) Is a behavioral model that shows how people decide between alternatives that involve risk and uncertainty (e.g. % likelihood of gains or losses). 9. Recall the mean posterior belief from the Normal-Normal-Model of Bayesian Updating:$s\cdot\frac{\frac{1}{\sigma^2}}{\frac{1}{\sigma^2}+\frac{1}{\tau^2}}+\mu_0\cdot\frac{\frac{1}{\tau^2}}{\frac{1}{\sigma^2}+\frac{1}{\tau^2}}$ What is the meaning of the term $\frac{\frac{1}{\sigma^2}}{\frac{1}{\sigma^2}+\frac{1}{\tau^2}}$ A) Signal. B) Weight on the prior belief. C) Prior belief. D) Weight on the signal. Show Answer Correct Answer: D) Weight on the signal. 10. Possessing the knowledge and skills to effectively manage finances and be an informed consumer A) Financial literacy. B) False statistics. C) Commitment device. D) Confirmation bias. Show Answer Correct Answer: A) Financial literacy. 11. I am a high school student from a small town in rural Kansas who has created a large, engaged following on Instagram. Companies compensate me to use my influence to create a desire in my followers to purchase certain products. Which of the following statements is true? A) I will get paid about the same as a celebrity influencer. B) My followers will trust my recommendations more than what they see in traditional advertising (such as TV or billboard). C) I am considered a "mega" influencer. D) I am more likely to be compensated with free products than money for promoting products on my page. Show Answer Correct Answer: B) My followers will trust my recommendations more than what they see in traditional advertising (such as TV or billboard). 12. What is the tendency to put too much weight on easily available information and too little weight on hard-to-obtain information known as? A) Availability bias. B) Aversion to ambiguity. C) False consensus. D) Anchoring and adjustment. Show Answer Correct Answer: A) Availability bias. 13. What is a Testimonial in advertising? A) Propaganda. B) Take a test. C) A statement by a person in support of a particular truth. D) When you tell your side of the story. Show Answer Correct Answer: C) A statement by a person in support of a particular truth. 14. Which social media platform has the most influence on shopping habits? A) Facebook. B) Twitter. C) Instagram. D) Snapchat. Show Answer Correct Answer: C) Instagram. 15. In prospect theory, individuals dislike ..... more than equivalent ....., they are more willing to take risks to avoid a loss. A) Losses gains. B) Gains losses. C) Lossess profits. D) None of above. Show Answer Correct Answer: A) Losses gains. 16. Is when someone rates their own personalperformance as higher than it actually is. The realityis that most people think of themselves as betterthan average. A) Timing Optimism. B) Over Ranking. Show Answer Correct Answer: B) Over Ranking. 17. The Traditional Finance assumes that people are: A) Benevolent. B) Kind. C) Selfish. D) None of the above. Show Answer Correct Answer: C) Selfish. 18. Actions that someone takes in the present to attempt to control their future behavior A) Confirmation bias. B) Commitment device. C) False statistics. D) Financial literacy. Show Answer Correct Answer: B) Commitment device. 19. What is meant by the concept of bounded rationality in behavioral finance? A) Individuals are influenced by biases and emotions in their decision-making. B) Individuals make rational decisions based on full information and unlimited cognitive abilities. C) Individuals have cognitive limitations and rely on heuristics to simplify decision-making. D) None of above. Show Answer Correct Answer: C) Individuals have cognitive limitations and rely on heuristics to simplify decision-making. 20. What is the law of small numbers in the context of behavioral finance? A) The tendency to avoid making a decision because of fear of suboptimal outcomes. B) The belief that a small sample of outcomes always resembles the long-run distribution of outcomes. C) The tendency to give recent events more importance than less recent events. D) The reliance on stereotypes or limited samples to form opinions. Show Answer Correct Answer: B) The belief that a small sample of outcomes always resembles the long-run distribution of outcomes. ← PreviousNext →Related QuizzesFinance Theory QuizzesBehavioral Finance Quiz 1Behavioral Finance Quiz 2Behavioral Finance Quiz 3Behavioral Finance Quiz 4Behavioral Finance Quiz 5Behavioral Finance Quiz 6Behavioral Finance Quiz 7Behavioral Finance Quiz 9Behavioral Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books