Prospect Theory Is Based on the Concept That Investors Are

question 81

Multiple Choice

Prospect theory is based on the concept that investors are:

• A) always risk takers.
• B) risk-adverse regarding losses.
• C) risk-taking regarding losses.
• D) always risk-averse.
• E) neutral regarding risk.

---

Definitions:

Sensory Input

Information that is received by the senses (such as sight, sound, touch, taste, and smell) and then interpreted by the brain.

Perceptual Constancy

A psychological phenomenon in which the perception of an object remains unchanged despite variations in its presentation or viewing conditions such as lighting, angle, or distance.

Proximal Stimuli

The stimuli that directly interact with the senses, as opposed to distal stimuli which are objects and events in the environment that provide information for the proximal stimuli.

Distal Stimuli

Objects or events in the external world that provide the basis for the perception of our immediate environment, as opposed to the sensory inputs that they generate.