Section C (4 Mark)

Suppose Gaurav, an investor, is looking to add to his portfolio and hears about a potential investment through a friend, Hitesh, at a local coffee shop. The conversation goes something like this:

GAURAV: Hi, Hitesh. My portfolio is really suffering right now. I could use a good long-term investment. Any ideas?

HITESH: Well, Gaurav, did you hear about the new IPO [initial public offering] pharmaceutical company called Pharma Growth (PG) that came out last week? PG is a hot new company that should be a great investment. Its president and CEO was a mover and shaker at an Internet company that did great during the tech boom, and she has Pharma Growth growing by leaps and bounds.

GAURAV: No, I didn’t hear about it. Tell me more.

HITESH: Well, the company markets a generic drug sold over the Internet for people with a stomach condition that millions of people have. PG offers online advice on digestion and stomach health, and several Wall Street firms have issued “buy” ratings on the stock.

GAURAV: Wow, sounds like a great investment!

HITESH: Well, I bought some. I think it could do great.

GAURAV: I’ll buy some, too.

Gaurav proceeds to pull out his cell phone, call his broker, and place an order for 100 shares of PG.

Which of the following biases have been exhibited by Gaurav?