Hello, would anyone mind explaining why hindsight bias doesn’t apply here and only availability bias does? Thanks!
Koval asks Mayer about adding new asset classes to the taxable portfolio. Mayer suggests emerging markets equity given its positive short-term excess return forecast. However, Koval tells Mayer he is not interested in adding emerging markets equity to the account because he is convinced it is too risky. Koval justifies this belief by referring to significant losses the family trust suffered during the recent economic crisis.
Q. Koval’s attitude toward emerging markets equity reflects which of the following behavioral biases?
- Hindsight bias
- Availability bias
- Illusion of control