Asked by steven belizaire on May 09, 2024
Verified
What is the best definition of affect heuristic?
A) The tendency to focus on avoiding short-term losses, even at the expense of long-term gains.
B) The tendency to avoid making a decision because you fear that the decision would have been less than optimal.
C) The tendency to consider something that you own to be worth more than it would be if you did not own it.
D) Confusion between real buying power and nominal buying power.
E) The reliance on instinct instead of analysis in making decisions.
Affect Heuristic
A mental shortcut used in decision making that involves relying on current emotions to evaluate the desirability and risks of different options.
Real Buying Power
The actual amount of goods and services that can be purchased with a unit of currency, taking into account inflation and other factors affecting price levels.
Short-Term Losses
Financial losses realized on the sale or exchange of assets held for a short period, typically less than one year.
- Absorb the fundamental principles of behavioral finance, mainly biases and heuristics.
Verified Answer
FA
fatima alkadriMay 10, 2024
Final Answer :
E
Explanation :
The affect heuristic is a mental shortcut that helps individuals make decisions based on their emotions and feelings rather than on detailed analysis. People rely on their general impressions and feelings towards an outcome or object, which can lead to quicker but not always accurate decisions.
Learning Objectives
- Absorb the fundamental principles of behavioral finance, mainly biases and heuristics.