Ethics and behavioural finance

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Question - Ethics and behavioural finance

1. Assume we are now in mid- or late July 2022. After conducting your own analysis, you have made a decision to buy shares of CSGP in August. However, your friend, Jaden who is a financial advisor for CSGP tells you that CSGP's earnings for the second quarter 2022 is higher than the analyst estimates. He suggests you to buy its shares immediately (i.e. in mid- or late July 2022) before this information is announced to the public (and price increases). Please state and explain which CFA Institute Code and Standards Jaden has breached.

2. [Behavioural finance] After getting this information from Jaden, you refuse to take a position in the stock today and decide to continue to wait until August to buy it. What is the best terminology to describe your behaviour? Please use the best behavioural terminologies covered in the lectures and also explain your answers.

3. [Behavioural finance] Please treat part (c) as an independent question. Assume you have lost money from your investment in CSGP in August 2022. You now decide to invest your fund in a different stock. You have been monitoring the price and return movement of stock XYZ (a random name) over the past few weeks. You find that XYZ has been falling by more than 3% and listed among the top declining stocks each trading day over the past one week. You decide to buy XYZ as you believe that there could be a very high chance for it to rebound and generate high return in subsequent periods.

What is the best terminology to describe your behaviour? Please use the best behavioural terminologies covered in the lectures and also explain your answers.

 

Reference no: EM133272681

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