Issues: Reading 5 practice question
Hi, guys. I am reading the textbook about behavioral finance. In practice question of reading 5, I do not agree with the solutions of questions 6.
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My understanding: I agree that the statement IS talking about mean-variance stuffs BUT it is a subjective claim from a client, NOT from a systematically statistical analysis. The client’s saying, “willing to take a small chance”, means personal experience or emotional judges like 8% loss is his bottom line. I think it should be related to layers and behavioral portfolio theory that allocates funds based on mental accounting.
Please give some advice.
Institute, CFA. 2018 CFA Program Level III Volume 2 Behavioral Finance, Individual Investors, and Institutional Investors. CFA Institute, 07/2017. VitalBook file.