Select the most accurate statement(s) about market tops.
A. It is never accompanied by irrational exuberance.
B. Cognitive dissonance begins to surface and increase during the early stages of a top reversal.
C. Fear is at its greatest during a market top.
D. Contrarians are mostly on the buy side.
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When traders experience cognitive dissonance, they will usually attempt to reduce their discomfort by:I. Selectively exposing themselves only to information that conforms or agrees with their current view of the markets (selective exposure bias).II. Being ego defensive and investing even more as the trend moves adversely against their positions (sunk cost bias).III. Ignoring or downplaying the problem (compartmentalization and loss aversion biases).IV. Accepting that they are responsible for their own mistakes.
A. Only I, II, and III are correct.
B. Only II and III are correct.
C. Only II, III, and IV are correct.
D. All are correct.
Generally speaking, behavioral phenomena tend to be more reflective of the markets when:I. More traders react in a rational manner.II. There is less automated or program trading in the markets.III. There is less market manipulation by the strong hands.IV. More traders react in an emotional manner.
A. Only I, II, and III are correct.
B. Only I is correct.
C. Only II, III, and IV are correct.
D. All are correct.
Which of the following is an example of certainty bias?
A. Traders prefer the uncertainty of locking in a larger profit rather than the certainty of securing a smaller one.Your selection is incorrect
B. Traders prefer using a stoploss to ensure that all loss is predetermined.
C. Traders prefer using a limit order to ensure that all profit is predetermined.
D. Traders prefer the certainty of locking in a smaller profit rather than the uncertainty of securing a larger one.
Select the statement(s) that best describe(s) irrational exuberance?I. It represents frenzied buying and selling in the market.II. It is irrational because P/E values are too high.III. It usually precedes a significant market decline.IV. It was a phrase first used by Alan Greenspan.
A. Only I, II, and III.
B. Only III and IV.
C. Only II, III, and IV.
D. Only II and III.