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Behavioral Finance studies support the broad conclusion that people tend not to think before they invest understand what they invest in make financial decisions purely based on the concept of rational utility properly value securities Behavioral studies suggest which of the following? People will act irrationally depending on what group they fall into: individual investors, mutual fund managers, hedge fund managers, professional traders, institutional investors, etc. People in all investment groups have a tendency to act irrationally, but what is irrational for one group may not be irrational for other groups. Non-professional investors tend to act irrationally, while better informed professionals act rationally Humans all act irrationally when it comes to financial matters Humans are endowed with inherent ways of making quick decisions. We tend to reference unknowns with things we are familiar with, and we have a tendency to place positive or negative "tags" on things that can be later referenced for quick decision-making. These related characteristics are known as Endowment effect and availability bias Ambiguity aversion and endowment effect Affect heuristic and endowment effect Affect heuristic and availability bias People frequently establish strong ideas or feelings about something that will affect the decisions they make. At times, these feelings are so strong that people stubbornly cling to them, even when confronted with factual evidence to the contrary. This is referred to as Familiarity Conservative Bias Anchoring Belief Perseverance Someone who purchases the stock of JP Morgan because they admire CEO Jamie Dimon is most likely exhibiting what behavioral characteristic? Home bias Halo effect Endowment effect Belief perseverance Someone who purchases stock in Transamerica because they see the Transamerica building everyday on their way to work and it gives them confidence is exhibiting Anchoring and familiarity Affect heuristic and familiarity Familiarity and Home Bias Herding and Home Bias People tend to prefer an outcome with known probabilities over one with unknown probabilities even when the known probabilities provide a lower expected return. But if taking the known probability means taking a definite loss, they might reverse that tendency. The two characteristics at work here are Anchoring and ambiguity aversion Ambiguity aversion and loss aversion Ambiguity aversion and representativeness Loss aversion and representativeness