Question 1

Which of the following statements are correct?
I. Many professional fund managers are paid well but fail to outperform as expected.
II. Professional fund managers that have tenures in excess of ten years, tend to consistently outperform the market on a long-term basis.
III. If a market is truly efficient, then all investments in that market are zero net present value opportunities.
IV. Actively managing a fund appears to be the key to outperforming the market.

Accepted Answer

A)  I and III only
B)  II and IV only
C)  II and III only
D)  I, II, and III only
E)  I, II, III, and IVF) A) and E)
G) A) and B)

Question 2

When weighing a decision, Kate places greater emphasis on opinions that match her own than she does on opinions offered by others that disagree with her personal point of view. Kate illustrates which one of the following?

Accepted Answer

A)  frame dependence
B)  overconfidence
C)  gambler's fallacy
D)  confirmation bias
E)  overoptimismF) A) and E)
G) A) and D)

Question 3

Historical returns support which one of the following statements?

Accepted Answer

A)  Financial markets are highly inefficient as suggested by behavioral finance.
B)  Professional money managers tend to outperform the Vanguard 500 index fund about 55 percent of the time on average.
C)  The longer the time span, the more apt a professional money manager is to outperform an index fund, such as the S&P 500.
D)  Historical data supports the statement that arbitrage is unlimited and results in a totally efficient market.
E)  The financial markets appear to be efficient because, on average, they outperform professional money managers.F) None of the above
G) All of the above

Question 4

The tendency for a decision maker to search for confirmation that a recent decision he or she made was a good decision represents which one of the following characteristics?

Accepted Answer

A)  overconfidence
B)  overoptimism
C)  affect heuristic
D)  confirmation bias
E)  representativeness heuristicF) A) and B)
G) C) and E)

Question 5

Recently, a neighbor you have known for years won a lottery and received a $250,000 prize. This neighbor decided to invest all of his winnings in a new business venture that he knew only had a five percent chance of success. Previous to this, the neighbor had always been ultra conservative with his money and had refused to invest in this business venture as recently as last week. Which one of the following behaviors most applies to your neighbor's decision to invest in this business venture now?

Accepted Answer

A)  overoptimisim
B)  affect heuristic
C)  loss aversion
D)  house money
E)  get-evenitisF) C) and E)
G) A) and C)

Exam 22: Behavioral Finance: Implications for Financial Management

When weighing a decision, Kate places greater emphasis on opinions that match her own than she does on opinions offered by others that disagree with her personal point of view. Kate illustrates which one of the following?

Correct Answer
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Historical returns support which one of the following statements?

Correct Answer
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Correct Answer
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The tendency for a decision maker to search for confirmation that a recent decision he or she made was a good decision represents which one of the following characteristics?

Correct Answer
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Correct Answer
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Exam 22: Behavioral Finance: Implications for Financial Management

When weighing a decision, Kate places greater emphasis on opinions that match her own than she does on opinions offered by others that disagree with her personal point of view. Kate illustrates which one of the following?

Correct AnswerverifiedShow Answer

Historical returns support which one of the following statements?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The tendency for a decision maker to search for confirmation that a recent decision he or she made was a good decision represents which one of the following characteristics?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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