Representativeness Refers to the Tendency to Insufficiently Alter a Judgment

question 32

True/False

Representativeness refers to the tendency to insufficiently alter a judgment away from some starting point when new information is received.

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Definitions:

Superior Returns

Returns that exceed the performance of a benchmark index or the average returns of a particular investment category.

Neglected-firm Effect

A theory suggesting that lesser-known, smaller companies can provide higher returns than their larger counterparts due to lack of analyst coverage.

Excess Returns

Returns on an investment that exceed a benchmark or average return, indicating higher-than-expected performance.

Abnormal Returns

Returns on a security or portfolio that exceed what is predicted by market models, such as the CAPM, indicating outperformance.