Chris, your client, begins a meeting with you, his investment advisor, by giving his investment philosophy as follows:

a) Investments should offer strong return potential but with very limited risk. I prefer to be conservative and to minimize losses, even if I miss out on substantial growth opportunities.

b) All nongovernmental investments should be in industry-leading and financially strong companies.

c) Income needs should be met entirely through interest income and cash

dividends. All equity securities held should pay cash dividends.

d) Investment decisions should be based primarily on consensus forecasts of

general economic conditions and company-specific growth.

e) If an investment falls below the purchase price, that security should be

retained until it returns to its original cost. Conversely, I prefer to take quick

profits on successful investments.

f) I will direct the purchase of investments, including derivative securities,

periodically. These aggressive investments result from personal research

and may not prove consistent with my investment policy. I have not kept

records on the performance of similar past investments, but I have had

some big winners.

Select the statement from the above that best illustrates each of the following behavioral finance concepts. Justify your selection.

i. Mental accounting.

ii. Overconfidence (illusion of control).

iii. Reference dependence (framing).