Chartered Investment Manager (CIM) Practice Exam · Question
An investor consistently sells winning investments too early and holds onto losing investments for too long, hoping they will recover. This behavioural bias is best described as:
Loss aversion describes the tendency for investors to prefer avoiding losses over acquiring equivalent gains, leading to behaviours like holding losing investme
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Question: An investor consistently sells winning investments too early and holds onto losing investments for too long, hoping they will recover. This behavioural bias is best described as:
Answer options:
- Anchoring.
- Confirmation bias. ✅ Loss aversion.
- Herding.
Correct answer: Loss aversion.
Explanation: Loss aversion describes the tendency for investors to prefer avoiding losses over acquiring equivalent gains, leading to behaviours like holding losing investments too long.
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