Which of the Following Tendencies of Individual Investors Is Called

question 38

Multiple Choice

Which of the following tendencies of individual investors is called the disposition effect?

• A)The tendency to trade too much based on the mistaken belief that they can pick winners and losers better than investment professionals.
• B)The tendency to buy stocks that have been in the news,advertised more,have very high trading volume,or recently had extreme (high or low)returns.
• C)The tendency to put too much weight on their own experience rather than considering historical evidence.
• D)The tendency to hold on to stocks that have lost value and sell stocks that have risen in value since the time of purchase.

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Definitions:

Increasing

A term indicating growth or an upward trend in quantitative measures or metrics, such as increasing sales, profits, or productivity.

Increasing

Refers to a situation or quantity that is becoming greater over time.

Annual Growth Rate

The percentage increase in the value of a particular investment or portfolio over the period of a year.

Discounting

The process of determining the present value of a future amount of money or stream of cash flows given a specific rate of return.