Which of the Following Types of Biases in Decision Making

question 46

Multiple Choice

Which of the following types of biases in decision making represents the tendency of decision makers to prefer a sure thing?

• A) hindsight bias
• B) bounded rationality
• C) escalation of commitment
• D) selective perception
• E) risk aversion

---

Definitions:

Risk Premium

The additional return an investor requires to invest in a risky asset compared to a risk-free asset, compensating for the higher risk.

Arbitrage

The practice of profiting from price differences of the same asset in different markets, exploiting inefficiencies without market risk by simultaneously buying and selling.

Expected Rate of Return

The mean amount of profit or loss one can expect from an investment, accounting for all possible outcomes.

Adjusted Beta

A measure that adjusts a security's beta (volatility relative to the market) based on its historical performance, to provide a more relevant estimation of its future volatility.