Our Minds Are Not Video Cameras That Objectively Record and Play

question 40

Essay

Our minds are not video cameras that objectively record and play back all events we see and hear.One reason eyewitness information is often unreliable is that one or more memory processes can be affected.What are those three processes, and what factors can bias them?

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Definitions:

Portfolio's Sigma

Portfolio's Sigma, often synonymous with standard deviation, quantifies the overall risk or volatility of a portfolio, indicating how its returns can vary from the expected return.

Single Index Model

A financial model that describes the return of a stock as a function of the return of a market index, plus a residual unique to the stock.

Actual Return

The real return an investor receives on an investment, factoring in all gains, losses, dividends, and interest.

Risk-Free Rate

The rate of return on an investment with no risk of financial loss, often represented by the yield on government securities.