Flashcard Set Preview
| Side A | Side B | ||
| 1 |
Optimism is a well documented trait among
|
(particularly young)
individuals who feel the odds of something bad occurring in their lives...
|
|
| 2 |
Or they simply do not even entertain the idea that
|
something could go wrong.
|
|
| 3 |
This common psychological trait leads to
|
overconfidence in an investment setting.
|
|
| 4 |
Overconfidence is the belief that
|
one can interpret information better
than the average investor and thus select superior investments....
|
|
| 5 |
Overconfidence
often leads to
|
excessive trading and undiversified portfolios.
|
|
| 6 |
Overconfident
individuals might even reject the notion of a positive relationship between
|
risk
and return, since their above-average ability to pick stocks means high gains
with...
|
|
| 7 |
This leads to frequent trading with associated
|
high
transactions costs and reduced returns.
|
|
| 8 |
Studies have shown that the increased
returns is more than out-weighed by
|
the increased costs.
|
|
| 9 |
The result is a net
return less than
|
that of an indexed portfolio.
|
No comments yet! Be the first to add a comment below!
Please login to post comments.
After login, we will forward you back to this flashcard.