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CFA Level I · CFA Level I Exam · The Behavioral Biases of Individuals

A financial adviser wants to reduce the effect of an investor's tendency to hold prior beliefs despite contrary evidence. Which approach is most likely to mitigate that bias?

The most effective approach is to have the investor actively seek the strongest evidence against the current thesis. Considering disconfirming information counters confirmation and conservatism effects. Using only agreeing sources or recent confirming returns would reinforce selective filtering and make the prior belief harder to revise.

  1. AEncourage the investor to seek the strongest evidence against the current thesis before investingCorrect
  2. BAsk the investor to rely on recent returns to confirm the thesis
  3. CAdvise the investor to use only sources that already agree with the thesis

Explanation

Belief perseverance biases are reduced by actively seeking disconfirming information and weighing it fairly, such as arguing the opposing case. Relying on sources that agree or on recent confirming returns strengthens selective evidence gathering and entrenches the belief.

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