How to answer the "justify you reason" in the exam?

When you are being ask to justify something, do you need to put the definition of the theory AND THEN the reason?

This usually happen in behavior finance, also happened in rational of secondary trading.


My personal opinion: I will not waist time writing “by-the-book” definitions. I will focus more on buzz words. For example, answer I could give in behavior finance: Bullet: Client faces Bounded Rationality Justification: - Client suffers “satisfacing”, as case mentioned x.

Client Joe exhibited framing bias when he was confronted with choice A and B, he chose A in fact there exactly was not difference between two alternatives. He based his decision on manner in which solutions were presented to him.

Get very specific as well by using details from the passage. Lots of candidates will answer very high level. If you just define the behavioral bias you won’t get full credit as you need to show that you saw IN THE PASSAGE why that bias was present

I think we shouldn’t define bias at all, just identify in which part of given case particular bias appear but might be wrong because there are some guidelines with defined biases and some with no definition just linking the bias with situation in sample.

thanks guys!

State the bias, and explain from the case why I chose that.

I’m all about bullet points. I think you can get lost in writing on this exam and lose track of time. For Justify your response questions. I clearly state my response up front. Take the facts from the case and tie it back into my response.

I’ll use my answer to the 2014 Mock exam question as an exam:

Question 3B: Is the description of Fund A’s investment style accurate - “Justify your response with one reason” (3 minutes)

My answer:

No - Fund A is described as value fund. However based on the returns style analysis 55% (19% + 18% + 18%) of the fund is invested in growth stocks. This description is not accurate as a majority of the fund is invested in growth stocks.

This was pretty much in line with the back of the book answer. Hopefully its full credit because for 3 minutes of time I’m not going to write paragraphs nor will I write paragraphs on the exam. Keep it simple and sweet. Don’t try and put in more information than is needed that could actually lose you points on the exam.

Me too. Where were yours?


Haha fixed