The Study of Behavioral Finance Has Best Helped Explain Which

question 11

Multiple Choice

The study of behavioral finance has best helped explain which of the following investor behaviors?

• A)Investors are often unable to short-sell unfavorable stocks.
• B)Investors often create undiversified portfolios.
• C)Investors tend to sell their losing stocks and retain stocks that have capital gains.
• D)Investors are generally too slow to update their beliefs in the face of new evidence.

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Definitions:

Liabilities

The rights of creditors that represent debts of the business.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, often referred to as shareholder’s equity or owners' equity.

Asset Turnover Ratio

A profitability ratio that measures how effectively a business is using its assets to generate sales, computed as sales divided by average total assets.

Long-Term Investments

Assets that a company intends to hold for more than a year, such as stocks, bonds, or real estate.