Which of the following statements resembles the behavioral trait of conservatism bias most accurately?
A) The investor tends to avoid or ignore information that is contrary to his beliefs. B) Rather than sell at a small gain, the investor waits for the stock to reach his forecasted target price. C) The investor places an incorrect value on information because it readily fits into a category with which he has recent experience.
* From Qbank
A is close to the correct answer…
I would say A.
B seems to be a rather rational decision even if we might detect the existence of anchoring.
C seems to be more related to representativeness I would say.
In the conservatism bias investors might be slow to react to new information or may avoid the difficulties associated with analyzing new information and simply stay with previous forecasts. The result may be a tendency to hold winners or losers too long. A and C The other two answer choices represent the confirmation bias where the investor dismisses information that is contrary to their beliefs and the representativeness bias.
*Solution from Kaplan Qbank.