NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Behavioural Finance in Practice
An investor refuses to sell a mutual fund unit that has fallen 20% below purchase price, saying she will sell only when it returns to her cost. Which behavioural bias is most directly shown?
The behaviour is loss aversion with a break-even mindset. The investor dislikes realising a loss and waits to recover her purchase cost, treating that cost as the reference point instead of judging the fund on its future prospects.
- ALoss aversion with a break-even mindsetCorrect
- BHome bias
- CRecency bias in forecasting
- DAnchoring to a broker's target price
Explanation
The investor treats the purchase price as a reference point and avoids realising a loss, which is loss aversion and the break-even effect. Home bias concerns preferring domestic assets, and the case contains no recent trend or broker target.
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