Q1. Which of the following best represents a psychological call option?

A)   A client automatically switching or “exercising the option” of switching advisors with each bad recommendation.

B)   A client not following the advice of an advisor and blaming all missed good opportunities on the advisor.

C)   A client following the advice of an advisor but believing his own decisions were the good decisions and that all bad decisions were the decisions of the financial advisor.

Q2. To avoid cognitive dissonance an investor might engage in:

A)   hindsight bias, which leads to a continued overestimation of his skill and blaming his advisor for any poor performance.

B)   random stock selection to be able to blame any loss on luck.

C)   ignoring the advice of the investment advisor.

Q3. Avoiding some investments is a symptom of:

A)   a psychological call option and can lead to an under-diversified portfolio.

B)   fear of regret and can lead to an under-diversified portfolio.

C)   fear of regret and can lead to an over-diversified portfolio.

答案和详解如下：

Q1. Which of the following best represents a psychological call option?

A)   A client automatically switching or “exercising the option” of switching advisors with each bad recommendation.

B)   A client not following the advice of an advisor and blaming all missed good opportunities on the advisor.

C)   A client following the advice of an advisor but believing his own decisions were the good decisions and that all bad decisions were the decisions of the financial advisor.

Correct answer is C)         

The investor can exercise the call and take credit for good investments or not exercise the call and let the advisor take the blame for poor investments.

Q2. To avoid cognitive dissonance an investor might engage in:

A)   hindsight bias, which leads to a continued overestimation of his skill and blaming his advisor for any poor performance.

B)   random stock selection to be able to blame any loss on luck.

C)   ignoring the advice of the investment advisor.

Correct answer is A)

Hindsight bias allows an investor to avoid recognizing his past mistakes. Not recognizing past mistakes will lead to his being able to think that he has been correct more often than he has actually been correct.

Q3. Avoiding some investments is a symptom of:

A)   a psychological call option and can lead to an under-diversified portfolio.

B)   fear of regret and can lead to an under-diversified portfolio.

C)   fear of regret and can lead to an over-diversified portfolio.

Correct answer is B)

The investor avoids some investments that she perceives as too risky or which she is not familiar with so she will not regret having made them. Avoiding investments can lead to an under-diversified portfolio.

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