Tricia Has Lost Money on a Particular Stock for the Past

question 43

Multiple Choice

Tricia has lost money on a particular stock for the past three years. Thus, she believes the stock will have a high positive rate of return this year because earning a good return is long overdue. This assumption is best described as the:

• A)law of small numbers.
• B)house money effect.
• C)gambler's fallacy.
• D)false consensus.
• E)recency bias.

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Definitions:

Preferred Shareholders

Investors who own preferred shares in a company, giving them priority over common shareholders in the distribution of dividends and assets.

Dividend Distributions

Payments made by a corporation to its shareholders, usually derived from the company's earnings.

Cumulative Voting

A voting system that allows shareholders to concentrate their votes on a single candidate for the board of directors.

Board of Directors

A group of individuals elected by shareholders to oversee the management and make major decisions for a company.