A Safe Driver Who Drives Faster as a Result of Purchased

question 23

Multiple Choice

A safe driver who drives faster as a result of purchased collision car insurance would be an example of the ___________ problem.

• A) moral hazard
• B) adverse selection
• C) Texas hedge
• D) actuarial error

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Definitions:

Survivorship Bias

The logical error of focusing on instances that survived a selection process and overlooking those that did not because of their lack of visibility.

Backfill Bias

A bias that can occur when historical performances of investment portfolios are artificially inflated because only successful funds are reported or included in analyses.

Incentive Bias

A psychological lean or predisposition towards certain decisions or actions due to promised rewards or incentives.

Survivorship Bias

The error of focusing on the successes or survivors in a group and overlooking those that failed, which can lead to overly optimistic beliefs or conclusions.