Emma made the following two statements during a meeting with her financial adviser: • “I am pleased with the returns from Apple because I have specific uses for that money. For that reason, I certainly want my son’s education fund to continue owning the Apple stock.” • “I have been very pleased with the returns I have earned on the Amazon stock over the past 3 years and I am certain that it will be a superior performer in the future.” Q1) Identify and discuss the behavioural finance concept that is most consistent with each of Emma’s two statements. Q2) Discuss whether behavioural biases are likely to affect equilibrium asset prices.
Emma made the following two statements during a meeting with her financial adviser: • “I am pleased with the returns from Apple because I have specific uses for that money. For that reason, I certainly want my son’s education fund to continue owning the Apple stock.” • “I have been very pleased with the returns I have earned on the Amazon stock over the past 3 years and I am certain that it will be a superior performer in the future.” Q1) Identify and discuss the behavioural finance concept that is most consistent with each of Emma’s two statements. Q2) Discuss whether behavioural biases are likely to affect equilibrium asset prices.
Chapter15: Mutual And Exchange Traded Funds
Section: Chapter Questions
Problem 3FPC
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Emma made the following two statements during a meeting with her financial adviser:
• “I am pleased with the returns from Apple because I have specific uses for that money. For that reason, I certainly want my son’s education fund to continue owning the Apple stock.”
• “I have been very pleased with the returns I have earned on the Amazon stock over the past 3 years and I am certain that it will be a superior performer in the future.”
Q1) Identify and discuss the behavioural finance concept that is most consistent with each of Emma’s two statements.
Q2) Discuss whether behavioural biases are likely to affect
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