Which of the Following Statements Is Most Correct

question 2

Multiple Choice

Which of the following statements is most correct?

• A) If you were testing dividend theories and found that a dividend increase resulted in higher stock prices, then you could rule out all other theories and conclude that the bird-in-the-hand theory was most consistent with the evidence you found.
• B) The clientele effect suggests that investors choose their investments based on firms' past dividend policies and changes to established dividend policies may be costly to investors.
• C) Dividends paid under a residual dividend policy might send conflicting signals to investors.
• D) Both statements b and c are correct.
• E) All of the statements above are correct.

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Definitions:

Fallacy Of Composition

The logical error of assuming that what is true for the individual parts must also be true for the whole group.

Slippery Slope Fallacy

A logical fallacy that asserts without sufficient evidence that a relatively small first action leads inevitably to a chain of related (negative) events.

Predicted Outcome

A predicted outcome is the expected result of an experiment or model, often based on theoretical insight or previous data.

Hasty Generalization

A fallacy in which a conclusion is not logically justified by sufficient or unbiased evidence.