#1
What is the main idea behind Behavioral Finance?
Irrational behavior in financial decisions
ExplanationStudy of psychological factors influencing financial choices.
#2
In the context of Behavioral Finance, what does 'Loss Aversion' imply?
A tendency to avoid losses more than acquiring equivalent gains
ExplanationPreferring to avoid losses over acquiring equivalent gains.
#3
What does the 'Herd Behavior' concept in Behavioral Finance refer to?
The tendency to follow the actions of the majority in decision-making
ExplanationDecision-making influenced by majority actions.
#4
What does the 'Sunk Cost Fallacy' refer to in Behavioral Finance?
Considering already incurred costs in decision-making, even when irrelevant
ExplanationFactoring irrelevant past costs into decision-making.
#5
What does the 'Bounded Rationality' concept in Behavioral Finance suggest about decision-making?
Decisions are influenced by cognitive limitations and information constraints
ExplanationDecision-making influenced by cognitive limitations and information constraints.
#6
Which concept in Behavioral Finance refers to the tendency of individuals to rely on recent events while making decisions?
Recency Bias
ExplanationDecision-making influenced by recent occurrences.
#7
According to Prospect Theory, which of the following describes the psychological impact of gains and losses?
Individuals are risk-averse for gains and risk-seeking for losses
ExplanationPreference for security in gains and risk-taking in losses.
#8
Which Behavioral Finance bias involves individuals giving more weight to recent events and extrapolating them into the future?
Recency Bias
ExplanationOvervaluing recent events and projecting them forward.
#9
What is the concept of 'Regret Aversion' in Behavioral Finance?
Avoiding investments that may lead to regret
ExplanationSteering clear of investments likely to cause regret.
#10
Which Behavioral Finance bias involves individuals valuing something more highly merely because they own it?
Endowment Effect
ExplanationOvervaluing possessions due to ownership.
#11
What does the term 'Anchoring' mean in Behavioral Finance?
The tendency to rely too heavily on the first piece of information encountered
ExplanationOverreliance on initial information in decision-making.
#12
Which Behavioral Finance concept refers to the tendency to place greater importance on information that confirms existing beliefs?
Confirmation Bias
ExplanationGiving more weight to information supporting existing beliefs.
#13
What is the primary focus of the 'Endowment Effect' in Behavioral Finance?
The psychological attachment to possessions
ExplanationOvervaluing possessions due to psychological attachment.
#14
According to Behavioral Finance, what does the 'Disposition Effect' suggest about investors?
They tend to hold on to losing investments and sell winning investments
ExplanationTendency to retain losing investments and sell winners.
#15
According to Behavioral Finance, what does 'Framing Effect' involve?
The influence of how information is presented on decision-making
ExplanationImpact of information presentation on decision-making.