Help
Course Catalog > Stocks > 400
Stocks 407: Psychology and Investing

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Confirmation bias is a good investing practice to follow because it usually leads to good decisions.
Choose wisely. There is only one correct answer.
False. While it sometimes does, it can also deprive us of choosing other, potentially good opportunities.
2.
Mental accounting is a psychological practice that refers to keeping our investments in good condition.
Choose wisely. There is only one correct answer.
False. Mental accounting really means putting our money in different buckets for different purposes. Its not always harmful, but sometimes it can inadvertently lead to wasteful spending.
3.
Self-handicapping bias occurs when we try to explain any possible future poor performance with a reason that may or may not be true.
Choose wisely. There is only one correct answer.
True. In other words, its like making excuses beforehand.
4.
A disadvantage of "anchoring" behavior in investing is that you might hold onto an investment longer than you should, given the fundamentals of the company behind it.
Choose wisely. There is only one correct answer.
True. As an investor, you might stick with an investment in order to wait for a point at which it will be "worth it" to you, which might lead to a loss on it.
5.
The framing effect can lead you to treat buying decisions in relative terms.
Choose wisely. There is only one correct answer.
True. This effect can affect the choices you make when you buy investments.
6.
What does investing with the crowd often lead to?
Choose wisely. There is only one correct answer.
Choosing investments that are inappropriate for your goals. Following investment fashion can lead to fading performance or inappropriate investments for your particular goals.
7.
What does overconfidence in investing often lead to?
Choose wisely. There is only one correct answer.
Rapid trading. Overconfident investors trade more rapidly because they think they know more than those on the opposite end of the trade.
8.
In investing, sunk costs refer to costs that have already been incurred.
Choose wisely. There is only one correct answer.
True. If the costs of an investment are high, we might become reluctant to dump it due to how much we have put into it.
9.
A way to describe the psychological concept of loss aversion is this: strongly preferring to avoid losses over acquiring gains.
Choose wisely. There is only one correct answer.
True. This behavior can in some cases cause you to lose money.
10.
If you are holding two beliefs that are seemingly at odds with each other and you are uncomfortable doing so, then you are suffering from _______.
Choose wisely. There is only one correct answer.
Cognitive dissonance. Because of the discomfort, you will need a way to resolve the dissonance.