Candidate B asks Green if she had additional information on Horizons industry peers and competitors, to put

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Candidate B asks Green if she had additional information on Horizon’s industry peers and competitors, to put the profitability estimates in a richer context. By asking for this additional information for their analysis, Candidate B is seeking to mitigate which behavioral bias?

A. Illusion of control B. Base rate neglect C. Conservatism Angela Green, an investment manager at Horizon Investments, intends to hire a new investment analyst. After conducting initial interviews, Green has narrowed the pool to three candidates. She plans to conduct second interviews to further assess the candidates’
knowledge of industry and company analysis.
Prior to the second interviews, Green asks the candidates to analyze Chrome Network Systems, a company that manufactures internet networking products. Each candidate is provided Chrome’s financial information presented in Exhibit 1.image text in transcribed

Green asks each candidate to forecast the 2020 income statement for Chrome and to outline the key assumptions used in their analysis. The job candidates are told to include Horizon’s economic outlook for 2020 in their analysis, which assumes nominal GDP growth of 3.6%, based on expectations of real GDP growth of 1.6% and inflation of 2.0%.
Green receives the models from each of the candidates and schedules second interviews. To prepare for the interviews, Green compiles a summary of the candidates’ key assumptions inExhibit 2.image text in transcribed

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Corporate Finance Workbook Economic Foundations And Financial Modeling

ISBN: 9781119743811

3rd Edition

Authors: CFA Institute, Michelle R. Clayman, Martin S. Fridson, George H. Troughton

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