Which of the Following Behaviors Is Consistent with Escalation Bias

question 24

Multiple Choice

Which of the following behaviors is consistent with escalation bias?

• A) Buying more of a stock as it increases in value.
• B) Buying more of a stock as it decreases in value.
• C) Selling a stock as it decreases in value.
• D) Selling a stock as it increases in value.
• E) Buying or selling a stock as it increases in value.

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Definitions:

Dividend Yield

An economic measure demonstrating the amount a firm distributes in dividends per year as compared to its share price.

Residual Dividend Policy

Residual Dividend Policy is a strategy where a company pays dividends to shareholders from the residual or remaining equity only after all project capital needs are met.

Dividend Market

is a sector of the financial market focused on the buying and selling of dividends or dividend-paying stocks, reflecting investors' interest in income-generating investments.

Net Present Value

A calculation that compares the present value of cash inflows to the present value of cash outflows over a period of time to assess the profitability of an investment.