Empirical Testing Has Confirmed the Validity of Which of the Following

question 107

Multiple Choice

Empirical testing has confirmed the validity of which of the following attitudes concerning dividends?

• A) Dividend irrelevance,or Modigliani-Miller,theory.
• B) Investors prefer dividends to capital gains because dividends are more certain.
• C) Investors prefer capital gains to dividends because capital gains are taxed at more favorable rates.
• D) Empirical testing has produced some evidence in support of each of the theories above.
• E) Empirical testing has not produced any definitive results.

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Definitions:

Overconfidence

Overconfidence refers to the tendency of individuals to overestimate their own abilities, knowledge, or predictions, often leading to suboptimal decision-making.

Over-Optimism

A bias where individuals or companies have excessively positive expectations about future events or outcomes.

Confirmation Bias

The inclination to seek out, comprehend, prefer, and remember information that validates one’s already held beliefs or theories.

Regret Aversion

A behavioral finance concept describing an individual's tendency to make decisions that minimize the potential for future regret.