Jack is a very experienced stockbroker who runs a boutique stock advisory business. His business proposition is that he looks after his clients to get the best portfolio results in the market. He makes all decisions regarding their portfolios and due to his experience and knowledge he believes that he can get better results than other advisers and the market in general. He actively manages his share portfolios and trades for his clients regularly.

 

(a) Identify the key behavioral finance issue presented in this scenario. Include in your response a brief definition of the issue.

(b) Provide evidence from the scenario to support your assessment.

(c) Discuss the consequences of the impact of this issue in the context of the scenario provided if the issue is not identified and addressed appropriately. 

(d) Based on the scenario, identify how the issue impacts either the giving or receipt of information. For example, what type of information is likely to be provided to investors in the scenario by the adviser, or what type of information would help the client in the scenario. 

Answer rating: 100% (QA)

a The key behavioral finance issue presented in this scenario is overconfidence bias Overconfidence ... View the full answer