Cfa Level 3 2013 Summary - 8327 Words

Behavioral Heuristics – Check Anchor/OAR Availability– Conservatism, Anchoring, Overconfidence, Ambiguity aversion, Representativeness, Availability Traditional Finance – TF-RAR - Risk averse, Asset integration, Rational expectations Behavioral Finance – BF-LAB - Loss averse, Asset segregation, Biased expectations Type of Investors – CMIS - Cautious, Methodical, Individualistic, Spontaneous IPS Process – OCSAEEA, Old Cars Sell At Eastern European Auctions – Objectives, Constraints, Strategy, Allocation, Execution, Evaluation, Adjustments IPS Constraints – URLIT - Unique, Regulatory/legal, Liquidity, tIme, Tax TDA vs. TEA – Higher Enders Take TEA – Higher Ending Tax rate TEA better Residence vs. Source – Pay Greater rate with†¦show more content†¦This is a sign of heuristic-driven bias. Behavioral finance assumes that: 1.investors are loss averse, which means they prefer uncertain losses to certain losses. 2.investors exhibit biased expectations, due to overconfidence in their ability to forecast the future. 3.investors construct portfolios via asset segregation, meaning that they tend to focus on an asset’s individual investment features versus its impact on the overall portfolio position By admitting his mistake but reiterating other projections, one used the single predictor defense. Feeling that they should spread out their risk, but not knowing how leads to the 1/n diversification heuristic. Often times, participants will only have a rough understanding of the effects of correlation and diversification and will simply divide their assets equally over the investment options in the plan in an attempt diversify their portfolio. DC participants tend to hold excess stock of the company they work for due to familiarity and a perceived endorsement by management. The endorsement effect refers to the misconception that by offering an investment as an alternative, the sponsor is implicitly endorsing it as a good investment. Note that the status quo bias refers to a lack of action on the part of the participant. Also note that putting too much in company stock would be an example of an investor being â€Å"boundedly selfish† in that there does not seem toShow MoreRelatedResearch And Analysis Of Hr Recruiting Event For A Financial Analyst Position1709 Words   |  7 Pages Final Paper Milestone #2 Student Nan Liu United States University: MGT504 HR Leadership 10/04/2015 Professor Jennifer Newmann Executive Summary This paper provides details about the research and analysis of HR recruiting event for a financial analyst position in a credit card company named Discover Financial Services in their headquarter Riverwoods, Illinois. 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