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A. clob
B. connection
C. tls
D. rulebase
Answer: C
NEW QUESTION: 2
Pace Insurance is a large, multi-line insurance company that also owns several proprietary mutual funds.
The funds are managed individually, but Pace has an investment committee that oversees all of the funds.
This committee is responsible for evaluating the performance of the funds relative to appropriate benchmarks and relative to the stated investment objectives of each individual fund. During a recent investment committee meeting, the poor performance of Pace's equity mutual funds was discussed. In particular, the inability of the portfolio managers to outperform their benchmarks was highlighted. The net conclusion of the committee was to review the performance of the manager responsible for each fund and dismiss those managers whose performance had lagged substantially behind the appropriate benchmark.
The fund with the worst relative performance is the Pace Mid-Cap Fund, which invests in stocks with a capitalization between S40 billion and $80 billion. A review of the operations of the fund found the following:
* The turnover of the fund was almost double that of other similar style mutual funds.
* The fund's portfolio manager solicited input from her entire staff prior to making any decision to sell an existing holding.
* The beta of the Pace Mid-Cap Fund's portfolio was 60% higher than the beta of other similar style mutual funds.
* No stock is considered for purchase in the Mid-Cap Fund unless the portfolio manager has 15 years of financial information on that company, plus independent research reports from at least three different analysts.
* The portfolio manager refuses to increase her technology sector weighting because of past losses the fund incurred in the sector.
* The portfolio manager sold all the fund's energy stocks as the price per barrel of oil rose above $80. She expects oil prices to fall back to the $40 to S50 per barrel range.
A committee member made the following two comments:
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She seems to sell stocks that appreciate, but hold stocks that have declined in value." The supervisor of the Mid-Cap Mutual Fund portfolio manager made the following statements:
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The portfolio manager's action is a behavioral trait known as anchoring." The under-weighting of the technology sector by the Pace portfolio manager could be best described as an example of:
A. gambler's fallacy.
B. regret minimization.
C. conservatism (anchoring-and-adjustment).
Answer: B
Explanation:
Explanation/Reference:
Explanation:
Regret minimization is the desire to avoid feeling the pain of making a poor financial decision. Regret minimization can impact new investment decisions because the investor wishes to avoid repeating the pain of a previous financial loss. The portfolio manager's under-weighting in technology is this kind of regret minimization. Note that is could also be a symptom of myopic loss aversion. (Study Session 3, LOS 8.b,
9.a)
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