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

Rohit, a salaried professional, refuses to sell a stock bought at ₹500 even though it now trades at ₹320 and his analysis shows poor prospects, saying he will sell only when it returns to ₹500. Which behavioural bias best describes this?

The best description is loss aversion tied to the purchase price as a reference point. Rohit avoids realising a loss and waits to break even despite poor prospects, which is the typical disposition effect, not home bias, recency or representativeness.

  1. ALoss aversion linked to the reference point of purchase priceCorrect
  2. BHome bias
  3. CRecency bias in forecasting
  4. DRepresentativeness bias

Explanation

Rohit anchors on his purchase price as a reference point and avoids realising a loss, which is loss aversion (disposition effect). Home bias concerns preference for domestic assets, and the case gives no hint of recency or stereotype-based judgement.

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