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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Behavioural Finance

Ms. Meera Nair, a client of an investment adviser, treats her annual bonus as 'fun money' and invests it in speculative small-cap stocks, while keeping her salary savings in low-yield fixed deposits, even though both are fungible rupees. This behaviour is best explained by:

This is mental accounting. Meera assigns her bonus and her salary savings to separate mental buckets with different risk attitudes, even though money is fungible. Gambler's fallacy, status quo bias and self-attribution bias do not explain treating money differently by source.

  1. AMental accountingCorrect
  2. BGambler's fallacy
  3. CStatus quo bias
  4. DSelf-attribution bias

Explanation

Mental accounting is treating money differently depending on its source or label, despite money being fungible. Gambler's fallacy involves expecting reversals in random sequences. Status quo bias is preferring no change. Self-attribution credits success to skill.

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