Which One of the Following Best Describes Heuristics

question 70

Multiple Choice

Which one of the following best describes heuristics?

• A)clustering
• B)rules of thumb
• C)grouping
• D)representativeness
• E)herding

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Definitions:

Dollar-Weighted Return

A method of calculating an investment's return that accounts for the timing and amount of cash flows into and out of the investment.

Time-Weighted Return

A measure of the historical performance of an investment portfolio which adjusts for external flows, such as cash injections or withdrawals.

Sharpe Measure

A metric used to assess the performance of an investment by adjusting for its risk, calculated as the difference between the investment's returns and the risk-free return rate, divided by the investment's standard deviation.

Beta

An index for assessing the variation or inherent risk of a security or a portfolio as compared to the aggregate market.