Question
1) Loss Aversion -What is it? Equally important, what is it not? How is loss aversion different than risk aversion? What generational adaptations might cause
1) Loss Aversion -What is it? Equally important, what is it not? How is loss aversion different than risk aversion? What generational adaptations might cause humans to display this behavioral tendency? What financial decision-making errors are made as a result of this bias?
2) Prospect Theory Please explain the basic tenants. How is it related to Loss Aversion? Draw the Prospect Theory Value Curve. Describe the shape attributes of the Prospect Theory Value Curve versus the traditional economic value curve.
3) Disposition Effect Describe this behavior. How is it related to Loss Aversion? How can it impact investors outcomes? What are the potential tax implications? How might an investor try to capitalize on this behavioral shortcoming of other investors?
4) Mental Accounting Review the basics. What is an example of how it can be disadvantageous financially? What is an example of how it might be used to promote positive financial behavior modification?
5) Overconfidence How is this related to behavioral finance theory? What are the two illusions that contribute to it? What is an example of the detrimental effect it can have on decision-making? How might it be applied constructively?
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