QUESTION $7$

Which behavioural factor is most likely to explain the $$Equity Premium Puzzle,$$ where stocks historically offer a higher return than bonds despite economic theories suggesting otherwise?

A$.$

Overconfidence

B$.$

Loss Aversion

C$.$

Mental Accounting

D$.$

Herding

E$.$

Anchoring

$2$ points

QUESTION $8$

Which theoretical framework is capable of accounting for both short$-$term momentum and long$-$term reversal in stock prices?

A$.$

Daniel$-$Hirshleifer$-$Subrahmanyam Model

B$.$

Grinblatt$-$Han Model

C$.$

Barberis$-$Shleifer$-$Vishny Model

D$.$

All of the above

E$.$

None of the above

$2$ points

QUESTION $9$

An individual investor purchases shares in a company with questionable fundamentals, fully aware that the stock is overvalued. However, she believes that she can sell the stock at a higher price to another investor later on$.$ Which behavioural finance theory and accompanying bias best describe this investor's actions?

A$.$

Efficient Market Hypothesis and Overconfidence

B$.$

Greater Fool Theory and Overconfidence

C$.$

Prospect Theory and Loss Aversion

D$.$

Herding Behaviour and Confirmation Bias

E$.$

Anchoring and Hindsight Bias

$2$ points

QUESTION $10$

The GameStop short squeeze in early $2021$ saw a dramatic increase in the stock's price, partly fuelled by retail investors on social media platforms. Which behavioural bias is most relevant in explaining the retail investors' collective actions to drive up the stock price?

A$.$

Overconfidence

B$.$

Loss Aversion

C$.$

Herding

D$.$

Anchoring

E$.$

Hindsight Bias

$2$ points

QUESTION $11$

Which behavioural factor is most likely to explain the $$Momentum Effect,$$ where assets that have performed well in the past continue to do well in the short$-$term future?

A$.$

Recency Bias

B$.$

Hindsight Bias

C$.$

Overconfidence

D$.$

Confirmation Bias

E$.$

Regret Aversion