Most People Do Their Own Personal Risk Assessments Based Upon

question 24

Multiple Choice

Most people do their own personal risk assessments based upon

• A)scientific data.
• B)whimsical preference devoid of logic.
• C)logical reasoning about relative risks.
• D)personal biases and preferences as well as logic.
• E)statistical probabilities.

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Definitions:

Market Efficiency

An economic theory that posits that it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information.

Security Prices

The current market price or value of a financial security, such as stocks and bonds, determined by supply and demand.

Excess Returns

The return on an investment that exceeds the benchmark or risk-free return, reflecting the additional risk taken by the investor.

Small-company Stocks

Equity investments in companies with smaller market capitalization, often characterized by higher volatility and growth potential compared to large-cap stocks.