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:

Artificial Time Periods

A concept in accounting referring to arbitrary time intervals chosen for the purpose of financial reporting, such as quarters or fiscal years.

Cash Basis Accounting

An accounting method where revenues and expenses are recognized when cash is received or paid, rather than when earned or incurred.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from revenue.

Sales

The total amount of goods or services sold by a company within a specific period; it is a primary source of revenue for retail and manufacturing businesses.