Ms. Dubois, a new high-net-worth client, has 70% of her portfolio in a single sector, Canadian resource stocks, which she inherited from her father. She acknowledges the concentration risk but has been reluctant to diversify, stating, 'I know the market, and I've always made money this way.' This belief, despite the inherent risks of a concentrated portfolio, best exemplifies which behavioral bias?

Question: Ms. Dubois, a new high-net-worth client, has 70% of her portfolio in a single sector, Canadian resource stocks, which she inherited from her father. She acknowledges the concentration risk but has been reluctant to diversify, stating, 'I know the market, and I've always made money this way.' This belief, despite the inherent risks of a concentrated portfolio, best exemplifies which behavioral bias?

Answer options:

• Status Quo Bias
• Hindsight Bias ✅ Overconfidence
• Availability Bias

Correct answer: Overconfidence

Explanation: Overconfidence bias leads individuals to overestimate their own abilities, knowledge, and judgment, particularly in complex areas like investing. Ms. Dubois's belief in her 'knowledge' and past success, despite diversification benefits, points to overconfidence.