Behavioral Finance Is the Study of

question 43

Multiple Choice

Behavioral finance is the study of

• A) how investors react to accounting-based profit fluctuations.
• B) how investors react to interest rates and foreign currency fluctuations.
• C) how investors react to certain ways to diversify a portfolio.
• D) how investors react to the amount of risk versus the amount of return in securities.

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Definitions:

Commitment, Control, Challenge

Three psychological characteristics that are significant for effectively responding to and managing stress.

Galatea Effect

A phenomenon where individuals' high self-expectations lead to improved performance.

Self-Expectations

The standards or goals an individual sets for themselves, which influence their behavior and effort in various aspects of life.

Expectancy Theory

A psychological theory that describes the motivational force behind choices individuals make, depending on their expectations of the outcome and the value they place on that outcome.