Biases

CFA Level III Portfolio Management
#1

Can someone please explain these behavioral biases.

Self attribution ,hindsight and Framing bias.

#2

why exactly are you asking this question.

self attribution - think of someone who praises himself for the successes and someone else for the failures. He is self attributing to the success.

hindsight - you are looking at things in the rearview mirror - things that already happened - and are basing your response to what happened based on that.

framing - you are swayed by the way the question / statement is put to you. Your analysis / etc. is based on the statement. Think a financial analyst - who looks at the management “goody” statements - and says the company is a good investment - without looking at the actual numbers to decide whether the company is really a good one to invest in.

#3

Thanks a lot for your answer.

There is this question in which a client is upset because she lost a lot of money when the market crashed. She blames the manager for the loss .She pulls out all the money from the account .She thinks she could have done a better job than the manger. What kind of bias is she displaying?

#4

This is self-attribution. She’s blaming the manger.

3 candidates fail the CFA exam:

  • Candidate 1 reasons for failing: the room was noisy; the guy next to me was making weird noises; one of the proctors smelled funny; the questions don’t reflect real markets circumstances; CFA wants us to fail to pay the re-enrollment… This is Self-attribution

  • Candidate 2 reasons: I knew I wouldn’t pass this year for my lack of time; I took the exam just to practice… This is Hindsight

  • Candidate 3: a famous CFA blogger said the exam this year would be the easiest exam ever, he said it will be as easy as CPA exams; hence, I didn’t study much. It was a party time… This is Framing

#5

The answer given is hindsight bias. Thanks for explaining …

#6

The question was as stated or you summarized it?

If “She” in the question is the client; then yes it’s a hindsight bias.

If “She” is an account manager of the client. Then it’s a self-attribution as she blamed someone else (her manager), for her mistakes.