Session 3 | Reading 9 | LOS a

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LO a: Evaluate the impact that representativeness, conservatism (anchoring-and-adjustment), and frame dependence may have on security pricing and discuss the implications for market efficiency.


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Created Jan 3, 2011
by lutfallah

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	Side A	Side B
1	Market efficiency assumes	all investors have the same information, interpret it the same, and make the same forecasts.
2	This implies that all assets are	priced efficiently.
3	However, the following behaviors can all lead to inefficiently priced stocks.	RepresentativenessConservatism (anchoring-and-adjustment)Frame dependence
4	Representativeness	can lead investors to make incorrect projections based upon stereotypes.
5	Conservatism	(anchoring-and-adjustment) refers to the inability to fully incorporate the impact of new...
6	Frame dependence	refers to investors’ tendency to frame their tolerance according to the direction of...