Stockbrokers often believe that their own expertise will enable them to select stocks that will outperform the market average. This belief best illustrates:
Correct answer: D. over confidence
- A. functional fixedness
- B. the farming effect
- C. the representativeness heuristic
- D. over confidence
Explanation
Overconfidence is the tendency to overestimate the accuracy of one’s knowledge or judgments, such as believing one can consistently beat the market. The representativeness heuristic concerns judging likelihood by resemblance to a typical case.
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