I see why home bias is correct but why is overconfidence not correct? It literally says in the vignette: “Johnson’s biases incldued illusion of control and overconfidence.”
lol i know…
Very very tricky q , you know what I would have chose , same as you. Overconfidence.
However …
The idea would be to adapt and moderate , i.e. live with the easy to adapt biases such as Home country , then moderate the other bias drawbwacks , such as more diversification and less trading.
While the latter is harder to do w.r.t Sarah , the former is easier to accomodate so go for it.
As I said the fine line is in CFA question setter’s head , we can only adapt to it
just CFAI BS.
you could write a nice short book about all the stupid ethics/behavioral questions they put out there and how conflicted they are
The reason is there is no sub-heading call Overconfidence under chapter 4 in reading 9. Explanation is simple as that.
really - do they provide chapter numbers on the exam? to tell you why a bias should be A) or B)?
Portfolio Construction is the key word here!