When the Overall Market Is Up by 10%, an Investor

question 115

Multiple Choice

When the overall market is up by 10%, an investor with a portfolio of defensive stocks will probably have:

• A)Negative portfolio returns less than 10%
• B)Negative portfolio returns greater than 10%
• C)Positive portfolio returns less than 10%
• D)Positive portfolio returns greater than 10%

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Definitions:

Thinking Style

The characteristic manner by which an individual processes information, makes decisions, and solves problems, often influenced by cognitive and personality factors.

Nonprogrammed Decisions

Decisions made to handle unique, non-recurring or novel situations, often requiring creative problem-solving.

Programmed Decisions

Decisions that are routine and repetitive, often made using predetermined rules or policies.

Escalation Of Commitment

The phenomenon where individuals or organizations continue to invest in a decision despite new evidence suggesting it may be a poor choice, often to justify previous investments.