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Behavioral Finance Quiz

The tendency of investors to hold on to losing investments longer than winning investments can be best described by

A. Belief Perseverance
B. Overreaction
C. Loss aversion

C...don't want to admit that they are facing losses ("they're only paper losses")

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C

NO EXCUSES

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The answer is A. CFAI Vol 2 page 296. The book mentions regret avoidance as another possibility as well.

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With 85% picking C it should be thrown out by the angoff method regardless.

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