Match each example to one of the following behavioral characteristics.

a. Investors are slow to update their beliefs when given new evidence.

i. Disposition effect

b. Investors are reluctant to bear losses due to their unconventional decisions.

ii. Representativeness bias

c. Investors exhibit less risk tolerance in their retirement accounts versus their other stock accounts.

iii. Regret avoidance

d. Investors are reluctant to sell stocks with

“paper” losses.

iv. Conservatism bias

e. Investors disregard sample size when forming views about the future from the past.

v. Mental accounting PROBLEM SETS www.mhhe.com/bkm 280 Part TWO Portfolio Theory LO.1