When People React to (Or Perceive) Identical Situations Differently in Different

question 158

Multiple Choice

When people react to (or perceive) identical situations differently in different contexts, we call that the

• A) planning fallacy.
• B) framing effect.
• C) confirmation bias.
• D) availability heuristic.

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Definitions:

Standard Deviation

A statistical measure that represents the dispersion or variability of a data set or investment returns, indicating how much the values in the set deviate from the mean.

Sharpe Ratio

A measure used to assess the risk-adjusted return of an investment by comparing its excess return to its standard deviation of returns.

Holding Period

The length of time an investment is held by an investor before being sold, which can affect tax treatment and investment strategy.

Correlation Coefficients

A measure that indicates the extent to which two variables change together, ranging from -1 to 1, where 1 means perfect positive correlation, and -1 means perfect negative correlation.