[ True / False ] The nature of the relationship between advisor and client following the cognitive behavioral approach is highly directed.
True
[ True / False ] Self talk usually does not influence feelings or behavior.
False
[ True / False ] The humanistic theory emphasizes excepting personal responsibility whereas the other two theories do not.
True
[ True / False ] Gestures and facial expressions are important close to communication for the listener.
True
[ True / False ] Tone and pitch of voice can indicate congruence were in concurrence with the word spoken.
True
[ True / False ] Body language does not play in important role in understanding communications.
False
[ True / False ] It is better not to make any gestures to the speaker one and advisers practicing active listening.
False
[ True / False ] Open ended questions are answerable with lengthy responses.
True
[ True / False ] In Traditional finance, investors are assumed to be rational.
True
[ True / False ] Markets are assumed to be efficient and both traditional and behavioral finance.
False
[ True / False ] Returns are determined by Risk (Beta) in both traditional and behavioral finance.
False
[ True / False ] Understanding behavioral biases can aid the financial advisor.
True
[ True / False ] Biases have no effect on stock prices.
False
[ True / False ] Behavioral finance is pure and concerned only with risk-reward and risk-return.
False
[ True / False ] Behavioral finance is more subjective than traditional finance and does not have a single cohesive theory.
True
Which of the following are consistent with the humanistic paradigm?
1. The majority of humanistic theories view clients as experts on themselves.
2. The alliance between the counselor and client is extremely important for humanistic counselors in the basi
The correct answer is b.
Statements 1 and 2 are key components to the Humanistic Paradigm discussed in the chapter. Statement 3 is incorrect because the Humanistic Paradigm embraces a close, friendly relationship between the client and advi- sor, such tha
Which of the following is not a promise and traditional finance?
A. Markets are efficient.
B. Investors are rational.
C. Markets are inefficient.
D. Modern portfolio theory governance.
c.
Markets are inefficient is NOT a premise in Traditional Finance. The premise is Traditional Finance is just the opposite, that markets are efficient and stock prices are equal to the fundamental or intrinsic value of the stock.
Which of the following are important and nonverbal communication and behavior?
1. Body positioning.
2. Body movement.
3. Voice tone.
4. Voice page.
A. 1 only
B. 1 and 2
C. 1 and 3
D. All of the above
d.
All of the above are important in nonverbal communication and behavior.
Which of the following investors would apply in the realm of behavioral finance?
A. A rational investor that considers his or her portfolio As a whole at all times.
B. An Investor not move by emotion or bias.
C. An investor who at all times is subject to
c.
The normal investor is one who can be subject to emotions or cognitive biases. Option a notes a rational inves- tor, which is, a hypothetical machine-like person in Traditional Finance. Option b involves a person not moved by emotion or biases who woul
Which of the following choices or false as to open or close questions?
A. Open or close questions are both effective tools for the financial advisor.
B. An open question starts with the phrase "isn't it true that..."
C. A close question is narrow and can
B
A closed question starts with the phrase "Isn't it true that ....
Active Listening
Requires the listeners undivided attention. Active listening involves concentration of what this speaker is saying. The listener must put aside your love and thoughts.
Affect Heuristic
Deals with judging something, whether it is good or bad.
Anchoring
attaching or angering one starts to a reference. Even though there may be no logical relevance or is not pertinent to the issue in question. Angering is also known as conservatism or believe perseverance.
Availability Heuristic
when a decision maker relies upon knowledge that is readily available in his or her memory, the cognitive heuristic known as "availability" is invoked.
Behavioral finance
Contains much of the scientific framework and lessons learned from traditional finance, and then some of it with basic assumptions based on normal, more human-like behavior, and supplements other aspects of it but the oceans from psychology and sociology.
Closed Questions
six response that is very specific and commonly involves an answer I can be accomplished with a single word or two. Close questions lead with is, are, do, did, could, would, have, or "is it not true that...
Cognitive behavioral paradigm (cognitive-behavior school of thought)
Human beings are subject to the same learning principles that were established an animal research. The basic principles of classical and operant conditioning are soon to account for an individual's behavior and understanding still out their lives.
Confirmation bias
a commonly used in popular phrases that "you do not get a second chance at a first impression." People turn the filter information and focus on information supporting their opinions.
Developmental paradigm ("developmental" school of thought)
believes that human development occurs in stages overtime relationships that are formed early in life become a template for establishing relationships in adulthood. As to emotions, the developmental paradigm assumes that all humans develop in progress in
Disposition effect
The cognitive bias was "faulty framing" Where normal investor do not mark their stocks to the market prices. Investors cream into account when they purchase stocks and continue to mark their value to purchase prices even after market prices have changed.
Gamblers fallacy
one of the incorrect assumptions from the world of probabilities; in the realm of probabilities, misconceptions can lead to 40 predictions as the occurrence of events.
Herding
this cognitive biases explain just by looking at the word people tend to follow the masses or the "Herd.
Hindsight bias
another potential buyers for an investor. Hindsight is looking back after the fact is now.
Human communications
comprised of fundamental elements. Societal groups user system of signs in their communication process. The sign could be a word, object, adjuster, tone, quality, image, substance or other reference according to code of sheer meaning among those who use t
Humanistic paradigm (the "humanistic in "school of thought)
dominated by theories who is models have their origins from the sheer philosophical approach. For client to grow the relationship requires a transparent and genuine counselor. He needs a philosophical stance that humankind is basically good and that peopl
Nonverbal behaviors
verbal cues, or body language, can communicate feelings and attitude from the client to the financial advisor and I mainly provided from the body and the voice. Body position and body movement on portal, while the voice tone and page are also telling.
Open questions
result in a person answering with a lengthy response that usually begins with words such as hell, what, when, where, who and why.
Overconfidence bias
usually concerns in investor that listens mostly to himself or herself, overconfident investors mostly rely on their skills and capacities to do their own homework or make their own decisions.
Overreaction
a common emotion towards the receipt of news or information.
Passing listening
described is listening in the normal our usual conversation or conversational setting to which most people are accustomed at seminars, in class, and social gatherings, or at sermons.
Prospect theory
provides the people there are you gains and losses differently and will be slower decisions on proceed games rather than their perceive losses.
Similarity heuristic
Use one of decision or judgment is made with a similar situation occurs.
Traditional finance (modern portfolio theory)
also described in the literature as though some of the concepts of the theory are not necessarily modern and have been subject to much debate and change over recent decades. Traditional finance is per missed on four basic premises:
1. Investors are ration
Explain the counseling theories and the schools of thoughts regarding communications
Developmental Paradigm
Human Development occurs in stages over time. I.e. relationships formed early in life become a template for established relationships in adulthood. Predictable sequence and disruptions will result in predictable problems.
Explain the counseling theories and the schools of thoughts regarding communications
Humanistic Paradigm
philosophical approach - having congruent and aligned thoughts, feelings and behavior.
Explain the counseling theories and the schools of thoughts regarding communications
Cognitive Behavioral Paradigm
humans are subject to the same learning principles | Questioning process is most prevalent because the counseling process I considerably more directive than it is in either of the other two paradigms.
Identify the elements of communication.
...
Describe nonverbal behavior or body language.
mainly provided from the body and the voice; body position and body movement are important; slouching or slumping; gestures and facial expressions.
Differentiate between active listening and passive listening.
Passive Listening: Think Seminars: normal/usual conversational setting to which most people are accustomed at seminars, in class, at social gatherings, or sermons. | Subject to many obstacles, interruptions, daydreaming, personal handheld and etc.
Active
Describe client data collection.
More than just collecting bank statements and papers: learn about who client is and what are the client's personal and financial goals, needs, priorities.
Client's self-worth and goals that needs to be understood: including unrealistic goals.
Describe Traditional Finance
I.e. Modern Portfolio Theory
Developed in 1950s and 1960s | provided focus and attention on relevant facts and information about markets, industries. | Specifically, extracted information from the markets and made the information narrow, objective, and standardized | aided investors
Describe the concepts in theory behind behavioral finance.
attempts to understand normal investors and how the action or inaction of these investors reflects collectively in the overall market.
Discuss the assumptions and building blocks of traditional finance.
Investors are Normal | Markets Are Not Always Efficient | The Behavioral Portfolio Theory Governs | Risk Alone Does Not Determine Returns
Describe what makes investors "normal" instead of "rational.
Normal Investors are prone to making cognitive mistakes due to their beliefs or cognitive biases.
� Affect Heuristic = deals with judging something, whether it is good or bad
� Availability Heuristic = deals with decision maker relies upon knowledge that
Describe patterns and types of cognitive biases:
Anchoring
Attaching or anchoring one's thoughts to a reference point even though there may be no logical relevance or is not pertinent to the issue in question.
Describe patterns and types of cognitive biases:
Confirmation Bias
Confirmation Bias: Tending to focus on information supporting their opinions.
Describe patterns and types of cognitive biases:
Gambler's Fallacy
Think coin, likely to proceed successively
Describe patterns and types of cognitive biases:
Herding
Decisions based on a person's desire to conform or be accepted by a certain group
Describe patterns and types of cognitive biases:
Hindsight Bias
Looking back after the fact is known.
Describe patterns and types of cognitive biases:
Overconfidence Bias
Mostly rely on their skills and capabilities to do their own homework or make their own decisions; driver of excess trading.
Describe patterns and types of cognitive biases:
Overreaction
key concept between normal and rational
tends to have an overreaction based on receipt of news.
Describe patterns and types of cognitive biases:
Prospect Theory
provides that people and value gains and losses differently and will base their decisions on perceived gains rather than perceived losses.
Describe patterns and types of cognitive biases:
The Disposition Effect
Helps provide some insight into the mind of the normal investor.