Question

Which of the following is the most likely action of investors with representativeness bias?

A.

They hold onto loser stocks for too long to avoid regret.

B.

They infer that good companies are also good investments.

C.

They buy the stocks other investors buy.

D.They attribute to bad luck any loss of money.

Which of the following is a characteristic of an overconfident investor?

	A.	They tend to trade too much because they believe more strongly in their own valuation of a stock.
	B.	The investors tend to hold risky amounts of big and well-known companies.
	C.	They remember failure more often than recollections of success.
	D.	They tend to overestimate risk.

Answer 1

1.

Representative bias is defined as Explointing past performance data for making future investment. they make decision based on past perfomance. So, most likely action of investors with representativeness bias they infer that good companies are also good investments.

Option (B) is correct answer.

2.

Characteristic of an overconfident investor is that they tend to trade too much because they believe more strongly in their own valuation of a stock.

Option (A) is correct answer.