Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors

Ms. Kavita, 35, answers a risk questionnaire shortly after a sharp market rally and scores as highly aggressive. Six months earlier, during a fall, she scored as conservative. Which bias or issue most directly explains the inconsistency in her profile?

Recency bias best explains it. Ms. Kavita's risk answers swing with the most recent market movement, rally or fall, rather than reflecting stable attitudes. Advisers should therefore cross-check questionnaire results over time and through discussion before finalising the profile.

  1. ARecency bias affecting her responses at the time of assessmentCorrect
  2. BHome bias in her security selection
  3. CAnchoring on the purchase price of her holdings
  4. DMental accounting of her retirement corpus

Explanation

Her answers shift with recent market movement, which is recency bias: giving too much weight to recent events. Home bias concerns domestic preference, anchoring concerns reference prices, and mental accounting concerns separate treatment of money. The adviser should therefore profile across cycles and re-validate.

Did you get it right without looking?

One question tells you little. A timed set on Risk Profiling for Investors shows your real accuracy, how long you take and where you lose marks.

Practise Risk Profiling for InvestorsFree diagnostic mock

More Risk Profiling for Investors questions