Escalation Bias Refers to the Situation in Which

question 104

Multiple Choice

Escalation bias refers to the situation in which

• A) investors have a propensity to sell winners too soon and hang on to losers too long.
• B) investors ignore bad news and overemphasize good news.
• C) investors tend to follow the herd.
• D) investors put more money into a failure rather than into a success.
• E) investors are all noise traders.

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Definitions:

Compounded Annually

The method of calculating interest where the total interest is added to the principal once per year, resulting in interest earning interest annually.

Perpetuity

A type of annuity that pays a fixed sum of money to an individual indefinitely.

Compounded Quarterly

Compounded Quarterly is a method of calculating interest where the interest earned over a quarter is added to the principal, and the subsequent interest calculation will include the previously earned interest.

Deferral Period

A span of time during which payments, especially loan or insurance premiums, are postponed.