According to the Theory of Recency Bias, Investors Tend to Believe

question 56

Multiple Choice

According to the theory of recency bias, investors tend to believe the financial markets will:

• A)gravitate to their long-term average rates of return.
• B)react over the next year in direct opposition to the performance of the prior year.
• C)have a maximum of three years of positive annual returns before declining somewhat.
• D)continue to perform as they have over the past couple of years.
• E)tend to reverse direction at least every five years.

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Definitions:

Grams

Grams are a unit of mass in the metric system, used to measure small weights of substances or objects, equivalent to one thousandth of a kilogram.

Decision Variables

Variables that represent choices available to a decision-maker in optimization problems.

Objective

A specific, measurable goal or target that an individual, team, or organization aims to achieve within a set timeframe.

Constraints

Limitations or restrictions that define the parameters within which a system or process must operate.