The False-Consensus Effect Is the Tendency to Overestimate the Degree

question 47

Multiple Choice

The false-consensus effect is the tendency to overestimate the degree to which others agree with your beliefs and opinions. Based on your understanding of processing biases, you know that this is most likely the result of:

• A) hindsight bias.
• B) the representativeness heuristic.
• C) confirmation bias.
• D) the overconfidence phenomenon.

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Definitions:

Downside Risk

The potential loss that could occur in an investment due to adverse price movements.

Geometric Average Return

A method for calculating the average rate of return on an investment, which accounts for the effects of compound interest.

Rates of Return

The gains or losses on an investment over a specified period, expressed as a percentage of the investment's cost.

Normal Distribution

A bell-shaped frequency distribution curve that is symmetrical about the mean, showing how data points, like stock returns, are dispersed or spread out.