Question

Investors may not be able to exploit behavioral biases due to I) fundamental risk. II) implementation costs. III) model risk. IV) conservatism. V) regret avoidance.

Select one:

a. I and II only

b. I, II, and III

c. I, II, III, and V

d. II, III, and IV

e. IV and V

Answer 1

Correct Option is (b.) I,II and III

Reason :

Investor may not be able to exploit behavioral biases due to Fundamental Risk, Implementation costs and model Risk.Implementation cost arises relating to transactions cost and certain limitation on short selling,Model risk means the risk arising due to wrong model interepretations of market values and Fundamental Risk means that it will take a too long time for market value and intrinsic value to be tends to meet at a point.