A retiree, Mr. Davis, with a moderately conservative risk tolerance, has a portfolio constructed of 60% fixed income and 40% Canadian equities. During a market downturn where his equity holdings depreciate by 15%, he insists on liquidating his bond portion to buy more of the distressed equities, stating, 'They're on sale, and I need to make up for my losses quickly.' Which combination of cognitive biases is Mr. Davis most likely exhibiting, considering his original risk profile and current actions?

Question: A retiree, Mr. Davis, with a moderately conservative risk tolerance, has a portfolio constructed of 60% fixed income and 40% Canadian equities. During a market downturn where his equity holdings depreciate by 15%, he insists on liquidating his bond portion to buy more of the distressed equities, stating, 'They're on sale, and I need to make up for my losses quickly.' Which combination of cognitive biases is Mr. Davis most likely exhibiting, considering his original risk profile and current actions?

Answer options:

• Anchoring and Familiarity Bias
• Hindsight Bias and Mental Accounting ✅ Regret Aversion and Overconfidence
• Loss Aversion and Availability Bias

Correct answer: Regret Aversion and Overconfidence

Explanation: Mr. Davis's desire to 'make up for losses quickly' and take on more risk than his original profile suggests regret aversion, as he wants to avoid feeling bad about the previous losses. His belief that he can successfully time the market to 'buy on sale' to recover quickly, despite his conservative profile, indicates overconfidence in his ability.