Don Sampson begins a meeting with his financial advisor by outlining his investment philosophy as shown below:
|
Statement Number |
Statement |
|
1 |
Investments should offer strong return potential but with very limited risk. |
|
2 |
All nongovernmental investments should be in industry leading and financially |
|
3 |
Income needs should be met entirely through interest income and cash |
|
4 |
Investment decisions should be based primarily on consensus forecasts of |
|
5 |
If an investment falls below the purchase price, that security should be retained |
|
6 |
I will direct the purchase of investments, including derivative securities, |
Select the statement from the table above that best illustrates each of the following behavioral finance concepts. Justify your selection.
i. Mental accounting.
ii. Overconfidence (illusion of control).
iii. Reference dependence (framing).