Private Wealth Management - Reading 14: Managing Individual behavioral, investment, class, following, framework

mayanfang1

Q8. Which of the following sets of assumptions is most relevant to the behavioral finance investment framework? Investors are:

A)   risk averse, investors demonstrate rational expectations with respect to investment choices, investors construct portfolios consistent with asset integration.

B)   loss averse, investors exhibit biased expectations, investors construct portfolios via asset segregation.

C)   risk averse, investors exhibit biased expectations, investors construct portfolios via asset segregation.

Q9. The concept of behavioral finance has begun to be employed in investment management. Which of the following statements is CORRECT regarding behavioral finance and its potential affect on a client’s risk objectives? Behavioral finance implies that investors are:

A)   loss averse, rather than risk averse, and this may have an impact upon the investors' willingness to take risk.

B)   risk averse, rather than loss averse, and this may have an impact upon the investors' willingness to take risk.

C)   loss averse, rather than risk averse, and this may have an impact upon the investors' ability to take risk.

Q10. Which of the following statements regarding individual investors, money managers, and security analysts is FALSE?

A)   Security analysts tend to perform better than money managers.

B)   Admiration is associated with excellent stock performance in the minds of value-expressive investors.

C)   Investors realize the need for financial counseling.

Q11. Behavioral finance indicates investors do NOT exhibit which of the following?

A)   Asset integration.

B)   Biased expectations.

C)   Asset segregation.

Q12. Focusing on asset-by-asset characteristics is an example of asset:

A)   assimilation.

B)   segregation.

C)   integration.

mayanfang1

答案和详解如下：

Q8. Correct answer is B)

Behavioral finance assumes that:

1. investors are loss averse, which means they prefer uncertain losses to certain losses.

2. investors exhibit biased expectations, due to overconfidence in their ability to forecast the future.

3. investors construct portfolios via asset segregation, meaning that they tend to focus on an asset’s individual investment features versus its impact on the overall portfolio position.

Q9. Correct answer is A)

Behavioral finance suggests that investors may view risk of loss differently from risk of gain (i.e., that they are more risk seeking in the domain of losses). This is known as being loss averse. The investor’s psychological profile can affect their willingness to take risk. However, the ability to take risk is a more objective measure of what is appropriate given the client’s situation.

Q10. Correct answer is C)

Investors are typically unwilling to pay for financial counseling. If advisement is offered, it is typically given in terms of a wrap account, not by fee-only planners. Evidence has shown that analysts pick better stocks than money managers manage portfolios. Mutual funds and individual companies use marketing ploys to gain admiration.

Q11. Correct answer is A)

Behavioral investors exhibit biased expectations and asset segregation, as well as loss aversion. Rational investors exhibit asset integrations.

Q12. Correct answer is B)

Asset segregation occurs when investors focus on asset-by-asset characteristics rather than how assets fit into an overall portfolio.

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