The Premise of Behavioral Finance Is That

question 34

Multiple Choice

The premise of behavioral finance is that

• A)conventional financial theory ignores how real people make decisions and that people make a difference.
• B)conventional financial theory considers how emotional people make decisions, but the market is driven by rational utility maximizing investors.
• C)conventional financial theory should ignore how the average person makes decisions because the market is driven by investors who are much more sophisticated than the average person.
• D)conventional financial theory considers how emotional people make decisions, but the market is driven by rational utility maximizing investors and should ignore how the average person makes decisions because the market is driven by investors who are much more sophisticated than the average person.
• E)None of the options

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Definitions:

Cortisol Levels

The concentration of cortisol, a hormone produced by the adrenal glands, which is often measured to assess stress response or adrenal function.

Epinephrine Levels

The concentration of epinephrine, also known as adrenaline, a hormone and neurotransmitter involved in the body's fight-or-flight response.

Pleasant Events

Activities or occurrences that induce positive emotions and enjoyment.

Selye

Hans Selye, an endocrinologist known for his research on stress and for defining the General Adaptation Syndrome.