1. Overconfidence is most likely to be displayed by:

A) A financial advisor with a three-year record of outperformance

B) An individual investor with 100% allocation to a broad equity index

C) The board of trustees of a college endowment fund comprised of liberal arts professors

D) A foundation with 100% allocation to risk-free government bonds because of low risk tolerance

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2. A rational investor would most likely:

A) Use emotional cues to re-balance portfolios

B) Take shortcuts when making asset allocation decisions

C) Completely and accurately process covariance data

D) Be influenced by the frame of an investment decision

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3. Sarah recently reviewed her portfolio as part of her year-end performance assessment. She sold several stocks that had positive results for the year but held on to two stocks that were below her purchase price. She did not re-evaluate the potential performance for these stocks. Which form of bias is she exhibiting?

A) Hindsight bias

B) Confirmation bias

C) Loss aversion

D) Overconfidence bias