A financial market participant purchased a stock for $20 per share. The stock goes up to $25 based on positive information. The new price is justified given available public information. However, the FMP sells the stock because he perceives it to be overpriced relative to the purchase price of $20. This individual is exhibiting a(n):

A. conservatism bias
B. anchoring and adjustment bias
C. illusion of control bias

Correct Answer: B

Anchoring and adjustment bias relates to using a piece of initial information as the premise upon which subsequent judgments, estimates, and conclusions are founded. Investors will begin with a given value 'anchor' ($20 in this example) when estimating a given value.