Q a schweser self test 02 behavorial finance answers

Explanation Davis is overconfident.. Question #3 of 6 B is susceptible to cognitive dissonance.. Explanation When professionals are overconfident, they tend to be susceptible to cogniti

Question #1 of 6

B) uses anchoring

Explanation

Timmons uses anchoring Despite the disappointing earnings announcements, he states that he

is not convinced that the firms' prospects are as grim He under-adjusts to new information because his beliefs about the firms are anchored in his previous optimistic forecasts

Question #2 of 6

B) is overconfident

Explanation

Davis is overconfident He states that he is certain of his forecasts and reports a remarkable (and perhaps not fully disclosed) performance record

Question #3 of 6

B) is susceptible to cognitive dissonance

Explanation

When professionals are overconfident, they tend to be susceptible to cognitive dissonance The professional will ignore information that conflicts with his image of being successful Davis admits only one past forecasting mistake in 15 years, which he then blames on an event outside of his control

Question #4 of 6

A) self attribution

Explanation

Davis states that if Congress had not unexpectedly increased spending above what he had expected, then his prediction would have been correct He is exhibiting self attribution bias, in which the analyst takes credit for successes and blames external events for failures, by claiming their forecast would have been accurate if the factors that were incorporated into the forecasting model hadn't changed The illusion of knowledge bias is when analysts think they are smarter than they actually are, which can be fueled by collecting a large amount of data The

representativeness bias is when the analyst judges the probability of a forecast being correct based on how much the available data represents the outcome

Question #5 of 6

A) support level

This is the sort of odd question you do see occasionally on the exam It is based more on the general CFA curriculum than on the specific reading It is completely unpredictable, and the most important issue is to not spend too long on it If you do not think of an answer, guess and move

on

First, recognize Brooks's strategy is to buy out of favor cheap stocks Second, notice all of the answer choices are technical analysis charting terms Third, think creatively to select or eliminate answers A support level refers to a price moving down and then rallying back up It vaguely fits

in with buying a low-price stock Nothing in the data or question relates to a moving average of price So eliminate answer "B" A resistance level might refer to a ceiling or floor on a price chart

It is not a wrong answer but "A" is the best-fit answer

Question #6 of 6

B) moving average where the short-term moving average is above the long-term moving

average, indicating a "buy" signal

Explanation

Davis is describing the moving average trading tactic in which the short-term moving average is above the long-term average, indicating a buy signal