If Stocks Are More Risky Than Bonds, Why Would a Rational

question 81

Essay

If stocks are more risky than bonds, why would a rational investor ever buy stocks?

---

Definitions:

Encoding Specificity

The principle that the retrieval of information is improved when the context present at encoding and retrieval is the same.

Von Restorff Effect

A psychological principle that items which stand out are more likely to be remembered than other items.

Episodic Memory

The memory of autobiographical events that can be explicitly stated, including times, places, and associated emotions.

State-dependent Memory

The phenomenon whereby information learned in a particular state of mind is more easily recalled when in the same state.