Answer to Question #151066 in Finance for Sidra Singh

Question #151066

The consensus in the market is that two stocks have zero alpha. If you are not informed and an average investor but you stand behind your non- zero alpha opinions on the stocks, your behavior follows which one

  • loss aversion
  • optimism bias
  • overconfidence bias
  • relative wealth concerns
1
Expert's answer
2020-12-17T05:26:26-0500

Overconfidence bias - individual investors believe they can pick winners and losers when, in fact, they cannot.

According to the CAPM, investors should hold risk-free assets in combination with the market portfolio of all risky securities.


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