Question
Saxona, an advisor for Diva Capital Management is working with a new client, Nikki Jettison. Prior to meeting with her, the advisor asks Nikki some
Saxona, an advisor for Diva Capital Management is working with a new client, Nikki Jettison. Prior to meeting with her, the advisor asks Nikki some diagnostic questions to determine whether she may have any of the following investment behavioural biases:
1. Anchoring
2. Hindsight
3. Regret aversion
4. Representativeness
5. Status quo
Some of the diagnostic questions asked by Saxona are given below
1. Would a prior investment decision that resulted in a loss stop you from making a similar decision, even if the new investment appears to be the best alternative?
2. How frequently do you review your investment portfolio?
3. Would you sell a recent equity investment following a management announcement of a significant decline in the expected growth rate of revenue?
A) What behavioural biases does each of the above diagnostic questions most likely reveal? (Saxona had been careful enough to design the questions in such a way that each question reveals a different bias)
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