CFP Research & Evidence-Based Practice 4 — Questions and Answers
Question 1: A financial planner uses a risk tolerance questionnaire that consistently produces the same scores when administered to the same client one week apart. This property is called:
- Validity
- Test-retest reliability (Correct answer)
- Internal consistency
- Construct equivalence
Correct answer: Test-retest reliability
Test-retest reliability refers to the consistency of a measure when repeated on the same subjects under the same conditions over time.
Question 2: A CFP practitioner discovers that a frequently cited study on retirement readiness used a convenience sample of college-educated respondents. The biggest threat to applying this research broadly is:
- Low statistical power
- Low external validity (limited generalizability) (Correct answer)
- High Type I error rate
- Insufficient blinding of researchers
Correct answer: Low external validity (limited generalizability)
A convenience sample of a homogeneous group threatens external validity because findings may not generalize to the broader, more diverse population.
Question 3: In Bayesian reasoning applied to financial planning, the 'prior probability' refers to:
- The probability calculated after observing new data
- The initial probability estimate before incorporating new evidence (Correct answer)
- The probability that the null hypothesis is correct
- The confidence interval around a point estimate
Correct answer: The initial probability estimate before incorporating new evidence
In Bayesian reasoning, the prior probability represents beliefs or estimates established before new evidence is incorporated.
Question 4: A financial planning researcher wants to measure 'financial well-being.' Since this is a theoretical construct, the researcher must establish which type of validity?
- Face validity
- Content validity
- Construct validity (Correct answer)
- Predictive validity
Correct answer: Construct validity
Construct validity ensures that a measurement instrument actually measures the theoretical construct it is intended to measure.
Question 5: A planner reads a study with a very narrow 95% confidence interval around its primary estimate. This narrow interval suggests:
- The result is practically significant but not statistically significant
- High precision in the estimate due to a large sample size or low variability (Correct answer)
- The researchers used a biased sampling method
- The study should be replicated before use
Correct answer: High precision in the estimate due to a large sample size or low variability
A narrow confidence interval indicates high precision in the estimate, typically resulting from a large sample size or low variance in the data.
Question 6: Which of the following is an example of 'anchoring bias' affecting a financial planner's interpretation of research?
- Giving too much weight to a recent high-profile market event when forecasting
- Over-relying on the first piece of information encountered when assessing study quality (Correct answer)
- Confirming existing beliefs by selectively reading supporting studies
- Attributing market gains to skill rather than luck
Correct answer: Over-relying on the first piece of information encountered when assessing study quality
Anchoring bias causes individuals to rely too heavily on the first piece of information encountered (the 'anchor') when making subsequent judgments.
Question 7: A study surveys 10,000 randomly selected US households about their savings habits using a validated instrument. The results show a strong correlation between financial literacy and emergency fund size. The study's primary strength is its:
- High internal validity from random assignment
- High external validity due to large random probability sample (Correct answer)
- Use of experimental manipulation
- Absence of any self-report bias
Correct answer: High external validity due to large random probability sample
A large, randomly selected national sample provides high external validity, meaning findings can be generalized to the broader US population.
CFP Research & Evidence-Based Practice 4
A financial planner uses a risk tolerance questionnaire that consistently produces the same scores when administered to the same client one week apart.
This property is called: