60.1K

Verified Solution

Link Copied!

Most investors are risk adverse and the rational investor will seek a higher return for an increase in the amount of risk being taken. There are psychological factors that will impact an individual investors approach to asset selection. The following is a list of psychological factors and a likely approach to investment decision making. Match the change in economic variable that is likely to lead the investor with the particular psychological profile to sell their shares. PSYCHOLOGICAL FACTORS PSYCHOLOGICAL FACTORS APPROACH TO INVESTMENT DECISION MAKING CHANGE IN ECONOMIC VARIABLE NUMBER CHANGE IN ECONOMIC VARIABLE A Overconfidence Past performance of the firms stock 1 Majority recommendation to sell B Optimism Gut feeling on the economy 2 Directors investigated by MBIE C Fear of loss Reputation of the firm 3 Individual share price falls D Herd behaviour Family recommendations 4 New news about the firm that was previously unknown E Cognitive bias Brokerage house recommendations 5 Unemployment rates rise Criteria-based Marking Guide for Question 4 NZ financial markets and systems EXCELLENT (MARK RANGE: 45 MARKS) SATISFACTORY (MARK RANGE: 2.53.5 MARKS) UNSATISFACTORY (MARK RANGE: 02 MARKS) four (4) or more correct matches identified two (2) to three (3) correct matches identified none or one (1) match identified Insert your answers to Question 4 in the table below (Columns 3, 4 and 5) PSYCHOLOGICAL FACTORS PSYCHOLOGICAL FACTORS APPROACH TO INVESTMENT DECISION MAKING CHANGE IN ECONOMIC VARIABLE NUMBER CHANGE IN ECONOMIC VARIABLE A Overconfidence B Optimism C Fear of loss D Herd behaviour E Cognitive bias

Answer & Explanation Solved by verified expert

See Answer