NO.PZ2018091702000029
问题如下：
Luca Gerber recently became the chief investment officer for the Ludwigs Family Charity, a mid-size private foundation in Switzerland. Prior to assuming this role, Gerber was a well-known health care industry analyst. The Ludwigs’ family fortune is primarily the result of entrepreneurship. Gerhard Ludwigs founded ABC Innovations (ABC), a biotech company dedicated to small cell lung cancer research. The foundation’s portfolio is fifteen percent invested in ABC.
Gerber initially feels that fifteen percent investment in ABC is high. However, upon review, he decides it is appropriate based on Ludwigs’ involvement and their past success with similar ventures. Gerber makes a mental note to himself to closely monitor the investment in ABC because he is not familiar with small-cap startup companies. The remaining 85 percent of the foundation’s portfolio is invested in equity of high quality large-cap pharmaceutical companies. Gerber deems this allocation appropriate and is excited that he is able to continue to use his superior knowledge of the health care industry.
Discuss how Gerber displayed availability bias with one example. Determine the implications of availability bias for financial decision making and describe one way Gerber could overcome the bias.
选项： 解释：
Availability bias, a cognitive error, is an information-processing bias. Individuals exhibiting this bias will assess the likelihood of an outcome based on how easily they can recall the information. Gerber exhibits this bias in two ways:
• Although Gerber felt the foundation’s investment in ABC was high, he decided that Ludwigs’ involvement and their past success justified the investment in ABC. The information on the past success of Ludwigs’ investments came easily to mind.
• Gerber believed 100 percent of the foundation’s portfolio in the health care industry was appropriate, most likely because of his experience as an analyst in the industry. It is easier for Gerber to recall information from his past than to develop a diversified investment portfolio. Investors who exhibit availability bias may limit their investment opportunity set, may choose an investment without doing a thorough analysis of the stock, may fail to diversify, and may not achieve an appropriate asset allocation. Gerber exhibits all of these tendencies when he is evaluating the foundation’s portfolio.
The implications of this bias lead the portfolio to be undiversified, and as a result, the portfolio holds assets that may not be appropriate. Gerber is only investing in pharmaceutical companies. The following is a summary of issues with the foundation’s portfolio:
• No thorough analysis regarding investment in ABC.
• A limited investment opportunity set; invested only in the health care sector.
• An undiversified portfolio.
• An inappropriate asset allocation; invested only in equity.
Gerber could overcome this bias by developing an appropriate investment policy strategy, with a focus on appropriate goals (short- and long-term)， and having a disciplined approach to investment decision making. An investment policy statement would help provide discipline and would alert Gerber and his team that he really has only considered investments that he is familiar with. Further, Gerber and his investment team should consider the asset allocation within the portfolio.
availability bias in which people tend to recall things that comes to mind easily. Gerber initially feels that 15% investment in ABC is high, but he recalls the past success with similar ventures, so he decides to keep it going.
This will make investors put too much money into the memorable stock which has higher risk.
Ask more questions and think about other investments.
