Please provide full references for sources cited, if any.

Problem #2 (20 points)

A unit trust fund manager has to make regular assessments of the future performance of share prices, both in general, and in relation to particular companies.

(a)Discuss how the fund manager might use the following heuristics in making the assessments:



(iii)Anchoring and adjustment

(b)Discuss the biases that might arise from the use of each heuristic.

(c)Tversky and Kahneman have carried out the most widely cited research into heuristics and biases in human judgment under uncertainty. To what extent does their research provide evidence of the widespread occurrence of biased judgments by decision makers like the fund manager?