CFAI text - Asset Allocation with Real-World Constraints - Example 8

Hi folks,

For this question regarding the applicable behavioral biases, the answer was illusion of control and mental accounting. I believe CFA chose these as the answers as these are the biases listed in this particular chapter.

However, if you consider the case facts and all emotional and cognitive biases presented in earlier chapters, wouldn’t something like endowment or status quo be more applicable to this case? The case facts said the client is holding the concentrated stock due to loyalty, not because she knows better than others it will generate superior returns or something (illusion of control).

Any thoughts? Thanks.

Often times, biases cross over to other biases. Sometimes one behavior can be defined be 3+ biases.