Behavioral Finance Quiz | Behavioral Finance Online Test for Practice

31. What is the role of emotions in behavioral finance?

1. They lead to irrational decision-making
2. They enhance decision-making process
3. They have no impact on decisions
4. None of the above

32. What does "anchoring" refer to in behavioral finance?

1. Relying too heavily on initial information
2. Following others' actions blindly
3. Ignoring new information
4. Risk-averse behavior

33. The tendency of individuals to avoid making decisions that might result in losses is known as:

1. Loss Aversion
2. Endowment Effect
3. Mental Accounting
4. Overconfidence Bias

34. What does the concept of "loss aversion" imply in behavioral finance?

1. Investors fear losing more than they value gaining
2. Investors are indifferent to losses and gains
3. Investors avoid risk entirely
4. Investors prefer high risk

35. What is the phenomenon called when individuals rely on recent information to make judgments, ignoring prior data?

1. Availability Heuristic
2. Recency Bias
3. Hindsight Bias
4. Confirmation Bias

36. Which theory suggests that investors cannot process all information and therefore make decisions based on limited data?

1. Prospect Theory
2. Efficient Market Hypothesis
3. Bounded Rationality
4. Behavioral Portfolio Theory

37. Which of the following refers to the tendency of individuals to make decisions based on irrelevant information?

1. Framing Effect
2. Representativeness Heuristic
3. Sunk Cost Fallacy
4. Availability Bias

38. The phenomenon where individuals overestimate their ability to predict outcomes is known as:

1. Overconfidence Bias
2. Anchoring Bias
3. Confirmation Bias
4. Mental Accounting

39. The tendency to follow the crowd or take actions that others are taking is known as:

1. Herding Effect
2. Anchoring Bias
3. Disposition Effect
4. Loss Aversion

40. The bias where investors favor information that supports their pre-existing beliefs is called:

1. Confirmation Bias
2. Representativeness Bias
3. Hindsight Bias
4. Availability Bias