A Friend of Yours Recommends a Stock Based Upon a "Hot

question 57

Multiple Choice

A friend of yours recommends a stock based upon a "hot tip." You purchase it, and it subsequently declines the following year. Your friend advises you to purchase more at the lower price, despite clear evidence that this is not a sound company. Which of the following cognitive biases is being displayed by your friend?

• A) projection
• B) cognitive dissonance
• C) escalation of commitment
• D) frequency

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Definitions:

Abstract

A summary of a research paper or article, or relating to ideas and concepts not physically present or observable.

Emotional

Pertaining to feelings or expressions of sentiment, which can influence thoughts, behavior, and physical states.

Practical

Concerned with the actual doing or use of something rather than with theory and ideas; focused on real-world applications and outcomes.

Concrete

Pertaining to actual objects or specific, tangible details rather than abstractions; often used in developmental psychology to describe a stage where children think literally about physical objects and experiences.