Whenever Elaine Goes to the Casino, the Noise from All

question 34

Multiple Choice

Whenever Elaine goes to the casino, the noise from all the winning slot machines convinces her that she will be able to win enough money to pay off all her debts. Elaine is a victim of

• A) counterfactual thinking.
• B) the base-rate fallacy.
• C) the confirmation bias.
• D) the false-consensus effect.

---

Definitions:

Internationally-Diversified Portfolio

An investment portfolio that includes assets from a variety of countries outside the investor's home country to reduce risk and enhance returns.

Country Selection

Asset allocation in which the investor chooses among investments in different countries.

Stock Selection

An active portfolio management technique that focuses on advantageous selection of particular stocks rather than on broad asset allocation choices.

Political Risk

Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency for domestic currency, or other changes in the business climate of a country.