This quiz works best with JavaScript enabled. Home > Finance > Finance Theory > Behavioral Finance > Behavioral Finance – Quiz 6 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Behavioral Finance Quiz 6 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. 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. 2. 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. 3. Which social media platform has the most influence on shopping habits? A) Twitter. B) Instagram. C) Snapchat. D) Facebook. Show Answer Correct Answer: B) Instagram. 4. 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. 5. 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. 6. The Traditional Finance assumes that people are: A) Benevolent. B) Kind. C) Selfish. D) None of the above. Show Answer Correct Answer: C) Selfish. 7. Actions that someone takes in the present to attempt to control their future behavior A) Commitment device. B) Confirmation bias. C) False statistics. D) Financial literacy. Show Answer Correct Answer: A) Commitment device. 8. 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. 9. 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. 10. What is the primary goal of behavioral finance? A) To develop mathematical models for predicting market behavior. B) To understand and explain real-world financial decision-making. C) To maximize financial returns through risk management. D) None of above. Show Answer Correct Answer: B) To understand and explain real-world financial decision-making. 11. Who developed the Prospect Theory? A) Daniel Kahneman and Amos Tversky. B) Adam Smith. C) J.M. Keynes. D) Milton Friedman. Show Answer Correct Answer: A) Daniel Kahneman and Amos Tversky. 12. What is the tendency to believe that a small sample of outcomes always resembles the long-run distribution of outcomes? A) Law of small numbers. B) Aversion to ambiguity. C) Anchoring and adjustment. D) Recency bias. Show Answer Correct Answer: A) Law of small numbers. 13. In this type of ad consumers are encouraged to live like those they admire, even if they can't afford it. A) Aspirational buying. B) Dog Whistle. C) Bandwagon. D) Feedback Loop. Show Answer Correct Answer: A) Aspirational buying. 14. Who invented mental accounting? A) Kahneman and Tversky. B) Grinder. C) Thaler. D) Shiller. Show Answer Correct Answer: C) Thaler. 15. As per the prospect Theory: A) Pain of losing Rs. 100 is more than the happiness obtained from gain of Rs. 100. B) Pain of losing Rs. 100 is the same as the happiness obtained from gain of Rs. 100. C) Pain of losing Rs. 100 is less than the happiness obtained from gain of Rs. 100. D) None of the above. Show Answer Correct Answer: A) Pain of losing Rs. 100 is more than the happiness obtained from gain of Rs. 100. 16. What is the tendency to sell winners and hold losers known as? A) Loss aversion. B) Confirmation bias. C) Disposition effect. D) Anchoring and adjustment. Show Answer Correct Answer: C) Disposition effect. 17. A seller trying to take advantage of consumers' left digit bias is most likely to charge which of the following prices for one of his products? A) $ 1, 000. B) $ 3, 999. C) $ 1, 234. D) $ 4, 321. E) $ 9, 000. Show Answer Correct Answer: B) $ 3, 999. 18. A RM 100 loss hurts more more than the pleasure of receiving a RM 100 gain reflects which theory A) Efficient Market Hypothesis (EMH). B) Prospect Theory. C) The Accelerator Theory. D) The Neoclassical Theory of Investment. Show Answer Correct Answer: B) Prospect Theory. 19. Which type of decision requires thought, planning, and usually more of our monetary resources? This type of decision usually has a greater risk/consequences. A) Major decision. B) Routine decision. Show Answer Correct Answer: A) Major decision. 20. Believing or dismissing information based on whether it reinforces beliefs we already hold A) Commitment device. B) Financial literacy. C) False statistics. D) Confirmation bias. Show Answer Correct Answer: D) Confirmation bias. 21. In early 2021, investors bid up the price of GameStop stock from about $ 17 per share to roughly $ 300 per share. The price fell sharply shortly thereafter as investors began to sell the stock in large numbers. This is an example of ..... A) Left digit bias. B) A speculative bubble. C) The decoy effect. D) Loss aversion. E) Asymmetric dominance. Show Answer Correct Answer: B) A speculative bubble. 22. It relies onmathematical calculations, economic models and regressionsnot by their emotional interest. A) Behavioral Finance. B) Traditional Finance. Show Answer Correct Answer: B) Traditional Finance. 23. Which of the following represents the core idea behind behavioral finance? A) Quantitative models are the only reliable approach to finance. B) Human behavior and biases can influence financial decision-making. C) Financial markets are always efficient and rational. D) None of above. Show Answer Correct Answer: B) Human behavior and biases can influence financial decision-making. 24. An investor weighs more heavily to potential loss than potential gain. This concept is known as: A) Risk aversion. B) Loss Aversion. C) Risk Averse. D) None of the above. Show Answer Correct Answer: B) Loss Aversion. 25. The social position that a person holds A) Consumer. B) Status. C) Social media power user/influencer. D) Choice. Show Answer Correct Answer: B) Status. 26. If a person gives too much weights to recent information, they make following bias? A) Forecasting bias. B) Recency bias. C) Over confidence bias. D) None of the above. Show Answer Correct Answer: B) Recency bias. 27. Now suppose you have the option to pay your utility bills on an annual rather than a monthly basis. Assume that you have enough money in the bank that you could pay the annual bill (which is simply the sum of all of your monthly bills) without running an overdraft or taking out a loan.If your choices are consistent with Prospect Theory preferences, would you choose to do so? Once again, ignore the impact of any interest that you would earn (or forego). A) Annually. B) Monthly. Show Answer Correct Answer: A) Annually. 28. Prospect theory is ..... 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). 29. Which of the following is NOT a characteristic of Freemium Model? A) Offer some core services at no charge. B) Charges a premium if upgrades required. C) Able to pull in customers who are willing to pay eventually. D) All of the above. Show Answer Correct Answer: D) All of the above. 30. Lisa continues to practice Brazilian Jiujitsu even though she hates it, because she's already spent seven years practicing it and doesn't want all that time to have gone to waste. This is an example of ..... A) Social norms. B) The decoy effect. C) Left digit bias. D) The endowment effect. E) The sunk cost falllacy. Show Answer Correct Answer: E) The sunk cost falllacy. ← PreviousNext →Related QuizzesFinance Theory QuizzesFinance QuizzesBehavioral Finance Quiz 1Behavioral Finance Quiz 2Behavioral Finance Quiz 3Behavioral Finance Quiz 4Behavioral Finance Quiz 5Behavioral Finance Quiz 7 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books