QUESTION 18 Which of the following best describes Behavioral Finance? Behavioral Finance concepts are more developed...


  1. Which of the following best describes Behavioral Finance?

    Behavioral Finance concepts are more developed than Traditional Finance.

    Behavioral Finance streamlined financial data.

    Traditional Finance's introduction of scientific method into financial analysis has some benefit to Behavioral Finance.

    Behavioral Finance is very similar to Traditional Finance in its asset pricing models and portfolio theories.

  2. Which of the following are consistent with the Cognitive-Behavioral school of thought?

    Humans are beings that are subject to the same learning principles that were established in animal research.

    Self-talk, which refers to that ongoing internal conversation one has with oneself that can influence feelings, and behavior can be reinforced and persist.

    The counselor's challenge lies in performing a sound evaluation of how reinforcers are maintaining problematic self-talk and behaviors.

    The counselor is the expert in the Cognitive-Behavioral Paradigm, but the counselor and client have a working alliance where the client must be actively engaged.

    All of the above.

  3. Behavioral investors have been characterized as those who tend to choose portfolios by evaluation and decisions based on expected wealth, desire for security, aspiration levels, and probabilities of aspiration levels.



  4. Which of the following statements is / are correct?

    1. The cause of a loss is a peril.
    2. A hazard is a condition that increases the probability of a loss occurring.

    1 only.

    2 only.

    Both 1 and 2.

    Neither 1 nor 2.

Homework Answers

Answer #1

18. Behavioral finance is very similar to traditional finance in its asset pricing models and portfolio theories.

19. All of the above.

Cognitive-behavioral school of thought focusses on thoughts, memory, information processing, language and perception. Humans are being subject to same learning principles as animal research; bheVior can be reinforced and persist; counselors challenge regarding self talk and behavior; and counselors are the expert.

20. True.

Shrefin and Statman in 2000 developed as Behavioral Portfolio Theory where investors choose portfolio by decision based on expected wealth for security and potential, aspiration levels.


Both 1 and 2 are correct.

Peril is a cause of loss and hazard is a condition of loss that increase the chance of loss.

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