EOC Q Volume 2 Page 154: overconfidence

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!