Pompian (2012), on ASIC's reading list, classes status quo bias as an emotional bias and hindsight bias as a cognitive one. As the behavioural finance literature describes them, … (i) status quo bias is a preference for change over keeping current arrangements. (ii) hindsight bias leads people to believe, after the event, that an outcome was more predictable than it was.
Answer: C. (i) False, (ii) True
Answer: (i) False, (ii) True. Status quo bias favours keeping current arrangements, not change, while statement (ii) correctly describes hindsight bias. (i) False. Status quo bias is a preference for keeping things as they are, even when change would serve the person better; for advisers it shows up as reviews that never change anything. (ii) True. Hindsight bias, the 'I knew it all along' effect, makes past outcomes seem more predictable than they were, and leads to unfair judgements of past advice. Rule: Pompian classes status quo bias as emotional and hindsight bias as cognitive; the first favours inaction when circumstances may call for change, the second distorts how past decisions are judged. Source: Pompian 2012; Kahneman 2012; Plous 1993 (ASIC Exam preparation guidance v6.0 reading list)