Paul Miller, a Chartered Financial Analyst $($CFA$),$ is an investment consultant at Orion Advisors, an American asset management corporation. After earning his UQ Finance Degree a few years back, Miller now caters to three affluent clients. Every year, he reviews their investment strategies along with the responses to their newly filled$-$out risk appetite assessments. He notices distinct psychographic traits in each:

David Williams: A prosperous $47-$year$-$old hedge fund manager. Miller describes Williams as a cautious yet often self$-$overestimating investor with a moderate appetite for risk. Williams$$ psychological tendencies include regret avoidance, hindsight bias, and framing. In his annual review, he has expressed an interest in capital conservation but wants to heavily invest in shares from his own company.

Emily Clark: A $44-$year$-$old entrepreneur in the tech sector, who has been known to use considerable financial leverage. Before signing up with Orion, Clark managed her own concentrated equity portfolio. She exudes self$-$assuredness and is willing to take on high levels of risk. Her psychological blind spots are overconfidence and the illusion of control. Clark stated that she aims for capital growth and has a disinterest in stocks from outside the United States. She also mentioned that if multiple analysts from Orion recommended a particular stock, her willingness to invest would rise considerably.

Jack Anderson: A $68-$year$-$old tycoon who built his fortune in the healthcare sector. Miller finds Anderson to be conservative and future$-$focused. Concerned about asset safety, Anderson tends to seek counsel from those he views as more informed. His psychological tendencies include loss aversion, status quo bias, and the endowment effect. In his review, Anderson noted that he would be more comfortable investing if a unanimous decision was reached by Orion$$s Wealth Management Investment Committee.

Miller notes one commonality across the three clients: All would view a company with a solid growth trajectory and prior strong stock performance as a wise investment.

After each annual review, Miller updates the clients$$ investment strategies for their approval. Following this, he revisits their portfolios for any needed adjustments. Orion restricts the available investment options to those vetted by their analysts and sanctioned by their Wealth Management Investment Committee, which prides itself on its meticulous vetting process and Bayesian analytical methods.

Miller has an upcoming meeting with his boss to discuss the outcomes of these annual assessments and any recommended changes in portfolio allocation.

QUESTION $2$

Which psychological bias is Anderson overlooking when he relies on the unanimous decisions of the Wealth Management Investment Committee?

A$.$

Social proof

B$.$

Confirmation bias

C$.$

Gambler$$s fallacy

D$.$

Anchoring bias

E$.$

Optimism bias

$2$ points

QUESTION $3$

Given Clark's views about Orion$$s analysts, what bias is most likely present in their research?

A$.$

Confirmation bias

B$.$

Availability bias

C$.$

Self$-$attribution bias

D$.$

Recency bias

E$.$

Survivorship bias

$2$ points

QUESTION $4$

Which psychological bias is most significant when constructing an investment portfolio for Clark?

A$.$

Illusion of control

B$.$

Overconfidence

C$.$

Home bias

D$.$

Hindsight bias

E$.$

Anchoring bias

$2$ points

QUESTION $5$

Who would benefit the most from a conventional risk appetite questionnaire?

A$.$

Anderson

B$.$

Williams

C$.$

Clark

D$.$

All of them equally

E$.$

None of them

$2$ points

QUESTION $6$

Which behavioural tendency is least likely to be evident in the clients$$ shared belief about a company with strong growth and share price history?

A$.$

Herding

B$.$

Home bias

C$.$

Halo effect

D$.$

Anchoring

E$.$

Recency bias