Carl Holds a Large Position in Stock X That Was

question 23

Multiple Choice

Carl holds a large position in Stock X that was recently downgraded. Carl's advisor recommends he sell X and take his gain, which was accumulated over the past several years. However, Carl decides not to sell X. Carl's behavior best represents:

• A) the house-money effect.
• B) representativeness bias.
• C) loss aversion.
• D) the endowment effect.

---

Definitions:

Adjustment

A modification made to accounts, financial statements, or records to ensure their accuracy and compliance with financial reporting standards.

Put Option

A contractual financial agreement that allows the owner the option, but not the requirement, to dispose of a predetermined quantity of a particular asset for a fixed price during a defined period.

Specific Price

A precise valuation or cost assigned to a good, service, or asset in a specific transaction or scenario.

Specific Stock

Refers to the individual securities or shares issued by a company, representing ownership in that company.