Question: Question 1 Identify one behavioural bias or trait that is most exhibited from statement (i) to (iii) below. (i) Ali got involved with the portfolio

Question 1 Identify one behavioural bias or trait that is most exhibited from statement (i) to (iii) below. (i) Ali got involved with the portfolio process by researching some of their portfolio holdings. He has become overly attached to some holdings and only brought up information favourable to the holding. He looked for new information or distorted new information to support an existing view (5 marks) (iii) A football player scores four goals in FIFA world cup. More of his team mates start passing him the ball more often in the assumption he is 'on the ball (5 marks) You tend to accept the bet that a coin toss with a payoff of USD$500 for tails. Compared with consider a gift of USD$500 that is bundled with a bet that imposes a loss of USD$500 if that coin toss comes up heads. What behavioural bias lead to different attitudes topard the bet. (5 marks) (b) Describe utility theory used in traditional finance. Subsequently, discuss the complex risk functions observed in behavioural finance. You are required to show these three utility functions in a graph form. (15 marks) Question 1 Identify one behavioural bias or trait that is most exhibited from statement (i) to (iii) below. (i) Ali got involved with the portfolio process by researching some of their portfolio holdings. He has become overly attached to some holdings and only brought up information favourable to the holding. He looked for new information or distorted new information to support an existing view (5 marks) (iii) A football player scores four goals in FIFA world cup. More of his team mates start passing him the ball more often in the assumption he is 'on the ball (5 marks) You tend to accept the bet that a coin toss with a payoff of USD$500 for tails. Compared with consider a gift of USD$500 that is bundled with a bet that imposes a loss of USD$500 if that coin toss comes up heads. What behavioural bias lead to different attitudes topard the bet. (5 marks) (b) Describe utility theory used in traditional finance. Subsequently, discuss the complex risk functions observed in behavioural finance. You are required to show these three utility functions in a graph form. (15 marks)

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