Module 6 Comprehensive Assessment: Part A: Cognitive Biases
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Question 1 of 3
1. Question
Grading can be reviewed and adjusted.Grading can be reviewed and adjusted.Hint
Overconfidence leads to excessive trading (reducing returns through costs), inadequate diversification (concentrating risk), and poor risk management (underestimating potential losses).
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Question 2 of 3
2. Question
Grading can be reviewed and adjusted.Grading can be reviewed and adjusted.Hint
Anchoring examples: using purchase price as reference point for selling decisions, being influenced by 52-week highs/lows, or giving excessive weight to analyst price targets regardless of their validity.
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Question 3 of 3
3. Question
Grading can be reviewed and adjusted.Grading can be reviewed and adjusted.Hint
The disposition effect (selling winners too early, holding losers too long) stems from loss aversion and creates tax inefficiency by realizing gains (taxable) while holding losses (missing tax-loss harvesting opportunities).