Conservatism and Anchoring and Status quo

CFA Level III
#1

Any could differentiate the following 3 concept?

  1. conservatism

  2. anchoring

  3. status quo

the example in the notes are too similar. It indeed confused for several weeks!

#2
  1. Conservatism: belief preservation bias. Slow to react to new information(could be difficult to analyze). In Bayesian statist ics, place more weight on base rate than on the new information. [Mitigation: look carefully at the new information; seek advice.] 2. Anchoring: information processing bias. For example, stick to a previous forecast(usually a number). [Mitigation: consider the impact of new information on the orginal forecast. fundamental analysis. 3. Status quo: emotional bias. Do nothing. (The investors may have the information and but just don’t want to action. What can we do if he’s lazy?). Problems: risk drift; may lose profitable opportunity. [Mitigation: education, difficult to mitigate.]
#3

Tulku pretty much summed it up. Conservatism and Acnhcoring are both very similar. The main difference is that Anchoring is sticking to a forecast, in regards to a target number or price. Like if you had a target price of $35 for a stock, and new information came out yet your taregt didnt change. Conservatism is sticking to your forecasts and prior beliefs once new info comes out (not necessarily a value though).

Status quo is when an investor doesnt change his investments because he is complacent or lazy. Very common in defined contribution plans

#4

Spanish, good to see you again this year. Let’s dominate this test.

#5

You too Westibbs. Figured it was time to get back on the board (and make sure I can answer some questions haha). SO ready to be done with this. How’s the studying been going?

#6

Studying is going pretty well I think. I’ve obviously put in a ton of time, mostly focused throughout the process on Schweser/Q-bank, which is pretty non-traditional I guess compared to the CFAI EOC method. My scores on Schweser Vol 1 exams are pretty strong and CFAI PM exams are ok too, so now just focused mostly on CFAI AM’s, because my AM scores blow. I might hit CFAI EOC on problem areas (IPS and Behavioral Finance). Really looking forward to getting this behind me. How about you?

#7

Yea think its going well, but I worry about how many lists to memorize since I feel as though the AM session may ask us any random thing. Overall feel ok though, Ive only taken one full Mock from Schweser but did well on it. Hoping to take another one tomorrow, and sitting for the live Schweser on Saturday. Just getting worn down from all the studying, so ready for summer! Its funny cause I have poeple complain to me about studying for one module of the CFP, and Im always like I am the last person you should be comlaining to - I would love to have modules for the CFA instead of One BEAST every year haha.

#8

I’m finding Schweser AM’s to be a little more list oriented than CFAI AM’s, which are more thought provoking, less regurgitation IMO. I say do the Schweser Vol 1, but concentrate on CFAI after that. I’m signed up to take a test this weekend to from our local chapter here…pretty sure it’s the BSAS one, because it was only like $30. Last year that test was complete BS, but at least it’s practice…

#9

Make flashcards of all the Acronyms from the thread on here for lists. Life saver…probably about all you need to know or at least all you would want to spend time on.