Part A of Q 4 - Would you sell a recent equity investment following a management announcement of a significant decline in expected growth rate of reveue?
The answer is Anchoring??? I do not understand why?
derswap07 wrote:
Part A of Q 4 - Would you sell a recent equity investment following a management announcement of a significant decline in expected growth rate of reveue?
The answer is Anchoring??? I do not understand why?
Your response exactly demonstrates anchoring. You would rather hold onto an investment despite new information stating the future prospect looks weak. You originally bought the stock based on some previous forecast but you refuse to look past it.
Don’t overthink it, only go by what they give you. In real life if you thought this was some temporary trend, and the stock still hadn’t achieved intrinsic value, you might hold the stock based on some buy / hold strategy. But the fact this new info came directly from management (not some trading phenomenon from a contrarian’s pov), you should assume that’s the new info is reliable.
Not to mention - you HAVE to identify the type of biase b/c the question is telling you it’s a bias, so what fits better than anchoring?
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