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The illusion of control bias can be encouraged by ____.

Complex Models

The illusion of control can lead to analysts being overly confident when forecasting complex patterns, such as future interest rate movements.


An active accumulator…

…is entrepreneurial, often the first generation to create wealth. They are strong-willed, confident with high risk tolerance but are susceptible to emotional biases.

According to the Asset Manager Code the compliance officer should report to:

The CEO or the Board

Section E, Performance and Valuation, of the Asset Manager Code calls for the use of fair market values…

…sourced by third parities when available, and when not available to use “good faith” methods to determine fair value.

Michael Pompian Behavioural Investor Types


Likely Emotional Biases Likely Cognitive Errors
Passive Preserver
Friendly Follower
  • Regret Aversion
Independent Individualist
Active Accumulator

Ballard, Biehl & Kaiser 5-Way Model Archetypes


  • May hold highly undiversified portfolio
  • Make their own decisions, reluctant to take advice


  • Recognize their limitations, willing to seek and take advice


  • Concerned about protecting their assets
  • May seek advice
  • As people age they become Guardians


  • Easy to advise, will listen and process information

Straight Arrow

  • Sensible and Secure
  • Willing to take on some risk

5 Implications of the Adaptive Market Hypothesis:

  1. The relationship between risk and reward varies over time due to changes in risk preferences and the competitive environment.
  2. Active management can add value by exploiting arbitrage opportunities.
  3. Any particular investment strategy will not consistently do well but will have periods of superior and inferior performance.
  4. The ability to adapt and innovate is critical.
  5. Survival is the objective, must learn to adapt.

Efficient Market Hypothesis Summary

EMH – Weak Form: No past price or volume information can be used to generate abnormal returns (technical analysis will not work)

EMH – Semi-Strong Form: All publicly available information is reflected in prices (both technical and financial statement analysis will not work)

EMH – Strong Form: All public and private market information is fully reflected (insider information will not provide abnormal returns)

Some studies find evidence to contradict market efficiency.

The correct compliance statement to meet the requirements of the GIPS Advertising Guidelines is:

[Firm Name] claims compliance with the Global Investment Performance Standards (GIPS®).

For a GIPS compliant Private Equity composite you can estimate market value by:

Multiplying paid-in capital by RVPI