Reference no: EM131871307

1. There is empirical evidence that a significant portion of individual investors tend to invest excessively in the companies headquartered in the cities they live. They tend to believe that they know the performance of these companies better than other investors not living close to the companies, although there is no evidence supporting that. Which of the following behavioural biases best describe this phenomenon?

A. People tend to be overconfident, especially on the familiar subjects.

B. People tend to anchor to some non-sensible benchmark when making difficult estimates.

C. People tend to anchor to some non-sensible benchmark when making easy estimates.

D. People tend to anchor their valuation of a stock to the purchasing price.

E. People tend to be conservative, especially on the unfamiliar subjects.

2. How does Chins Noah’s profitability (using return on sales at the primary metric) change depending on whether the IDR/CNY exchange rate follows

(a) forecast spot rates, (b) forward rate quotes, or (c) fixed rate baseline assumption?