If a stock she holds falls in price, Ann Marget feels particularly bad and wishes she had sold it. Which of the following is the most likely result of her behavior? Marget is most likely to: A) have a poorly diversified portfolio. B) invest in risky stocks. C) depend on financial publications to guide her investment strategy.
a
because of fear of regret she will avoid some asset classes
b? She will invest in riskier stocks to try to compensate for her other losses. Not totally sure of this. But I couldn’t put a good reason to the other options. Looking forward to seeing the answer. Good question pat!
i’d probably go A, but b sounds ok too. not sure.
A or B … hmmm I will flip a coin and say A because she will stay away from certain asset classes due to regret which in turn will concentrate her portfolio in few asset classes hence low diversification…
C) depend on financial publications to guide her investment strategy. As she exhibits regret she’ll likely anchor to avoid it… The two reasons above me also seem plausible… bahhh… no idea now…
I will go with a, but it could be c.
Your answer: A was correct! Marget is likely to have a poorly diversified portfolio because her fear of regret will encourage her to stay in comfortable investments. This could lead to a lack of variety in her portfolio and a poorly diversified portfolio. She will avoid risky stocks and tech stocks because the risk of them could cause her to experience more regret. Her fear of regret would not necessarily cause her to depend on financial publications to guide her investment strategy. I was thinking b because of investors tendency to increase risk in order to make up for prior losses, but accidently clicked a
I hate behavioural finance…
lol@accidentally clicked a … i wish i would accidentally typed a…
i’ve done this question …when i did the behavioural finance qbank … probably a week ago… and I still thought it was B…how sad it that… it’s a thin line I guess…i’m not completely satisfied with schweser’s response though…yet again!!
Good to know that i wasn’t the only one who went for b